Gce Model Questions Vol1 2024 Economics Question 7

Practice objective / multiple choice question 7 from the 2024 Gce Model Questions Vol1 Economics examination.

Gce Model Questions Vol1 2024 Economics Objective / Multiple Choice Medium Difficulty
Question 7 GCE_MODEL_QUESTIONS_VOL1 • 2024 • ECONOMICS • objective

A firm's total cost function is \( TC(Q) = 0.02Q^{3} - 0.3Q^{2} + 15Q + 200 \) (₦). The market price is constant at ₦50 per unit. (i) Find the output level that maximises profit and compute the maximum profit (to two decimal places). (ii) If the market price falls to ₦30, should the firm shut down in the short run? Justify your answer with the relevant calculations.

Answer Options

A. Profit‑maximising output ≈ 25.00 units, maximum profit ≈ 450.00 ₦; the firm should continue operating (output ≈ 18.00 units, profit ≈ 30.00 ₦ > 0).
Correct Answer B. Profit‑maximising output ≈ 29.66 units, maximum profit ≈ 580.16 ₦; the firm should continue operating (output ≈ 21.58 units, profit ≈ 62.42 ₦ > 0).
C. Profit‑maximising output ≈ 28.75 units, maximum profit ≈ 500.00 ₦; the firm should continue operating (output ≈ 20.00 units, profit ≈ 10.00 ₦ > 0).
D. Profit‑maximising output ≈ 32.10 units, maximum profit ≈ 610.50 ₦; the firm should shut down (output ≈ 0 units, profit ≈ -200.00 ₦ < 0).
Correct Answer
B
Correct Option:
Profit‑maximising output ≈ 29.66 units, maximum profit ≈ 580.16 ₦; the firm should continue operating (output ≈ 21.58 units, profit ≈ 62.42 ₦ > 0).

About This Question

This is Gce Model Questions Vol1 2024 Economics Question 7. It is one of the objective questions from the 2024 Gce Model Questions Vol1 Economics examination.

Difficulty level: Medium .

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