Neco 2020 Economics Question 6

Practice essay / theory question 6 from the 2020 Neco Economics examination. This question covers Market Structures .

Neco 2020 Economics Essay / Theory
Topic: Market Structures
Question 6 NECO • 2020 • ECONOMICS • essay

The table below shows data for three firms (A, B, C) that produce identical smartphones in a particular market. | Firm | Output (units/month) | Price (₦ per unit) | Total Cost (₦) | |------|----------------------|--------------------|----------------| | A | 1,000 | 15,000 | 8,000,000 | | B | 800 | 15,000 | 6,500,000 | | C | 1,200 | 15,000 | 9,200,000 | Assume the market price is fixed at ₦15,000 per unit (price‑taking behaviour). The government is considering imposing a price ceiling of ₦12,000 per unit. Answer the following questions:

Question Parts

( a )
Identify the market structure of this industry and justify your answer with two characteristic features.
( b )
Calculate the profit (or loss) of each firm at the current price of ₦15,000 per unit.
( c )
If a price ceiling of ₦12,000 per unit is imposed, determine which firms, if any, will continue to produce in the short run. (i) Use the shutdown condition (price < average variable cost). (ii) Approximate each firm's average variable cost (AVC) by (TC – Fixed Cost)/Output, where the fixed cost for every firm is the same as the fixed cost you derived for Firm A in Question 5. (iii) State your conclusion for each firm.
( d )
Discuss two possible long‑run outcomes for the industry after the price ceiling is enforced.

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About This Question

This is Neco 2020 Economics Question 6. It is one of the essay questions from the 2020 Neco Economics examination.

The question covers Market Structures .

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