Neco 2018 Economics Question 6

Practice essay / theory question 6 from the 2018 Neco Economics examination. This question covers Market Structures, Perfect competition, Tax incidence, Short‑run equilibrium .

Neco 2018 Economics Essay / Theory

Topics: Market Structures Perfect competition Tax incidence Short‑run equilibrium

Question 6 NECO • 2018 • ECONOMICS • essay

In a perfectly competitive market the market supply curve is \(Q_S = 3P - 30\) (where \(Q_S\) is in thousand units and \(P\) is the price in ₦ per unit) and the market demand curve is \(Q_D = 150 - 2P\). The government introduces a per‑unit tax of ₦10 on producers.

Question Parts

( a )

Find the equilibrium price and quantity before the tax is imposed.

( b )

After the ₦10 per‑unit tax on producers, write the new supply equation and determine the new equilibrium price paid by consumers (\(P_c\)) and the price received by producers (\(P_p\)). Show all steps.

( c )

Compute the tax incidence:

( ) The amount of the tax borne by consumers.

( ) The amount of the tax borne by producers.

( d )

Discuss how the market would adjust in the long run if firms are free to enter or exit the industry. Include the likely effect on price, output and overall welfare.

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About This Question

This is Neco 2018 Economics Question 6. It is one of the essay questions from the 2018 Neco Economics examination.

The question covers Market Structures, Perfect competition, Tax incidence, Short‑run equilibrium .

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