Neco 2020 Economics Question 40

Practice objective / multiple choice question 40 from the 2020 Neco Economics examination.

Neco 2020 Economics Objective / Multiple Choice Hard Difficulty
Question 40 NECO • 2020 • ECONOMICS • objective

An industry produces widgets. Its total‑cost function is \(TC(Q)=500{,}000+150Q+0.05Q^{2}\) (₦) and the market demand curve is \(P=1{,}200-0.2Q\).\n(a) Determine the profit‑maximising output and price before any tax.\n(b) The government then imposes a specific tax of \(\text{₦}30\) per widget. Find the new profit‑maximising output and price paid by consumers.\n(c) Compute the change in consumer surplus, producer surplus and the tax revenue, and state the magnitude of the dead‑weight loss caused by the tax.

Answer Options

A. Before tax: Q=2150, P=770. After tax: Q=2090, consumer price=785. ΔCS=‑22,500 ₦, ΔPS=‑60,000 ₦, tax revenue=60,000 ₦, dead‑weight loss=22,500 ₦.
B. Before tax: Q=2100, P=780. After tax: Q=2020, consumer price=795. ΔCS=‑25,500 ₦, ΔPS=‑63,000 ₦, tax revenue=62,000 ₦, dead‑weight loss=26,500 ₦.
C. Before tax: Q=2000, P=800. After tax: Q=1950, consumer price=815. ΔCS=‑30,000 ₦, ΔPS=‑70,000 ₦, tax revenue=58,500 ₦, dead‑weight loss=31,500 ₦.
Correct Answer D. Before tax: Q=2100, P=780. After tax: Q=2040, consumer price=792. ΔCS=‑24,840 ₦, ΔPS=‑62,100 ₦, tax revenue=61,200 ₦, dead‑weight loss=25,740 ₦.
Correct Answer
D
Correct Option:
Before tax: Q=2100, P=780. After tax: Q=2040, consumer price=792. ΔCS=‑24,840 ₦, ΔPS=‑62,100 ₦, tax revenue=61,200 ₦, dead‑weight loss=25,740 ₦.

About This Question

This is Neco 2020 Economics Question 40. It is one of the objective questions from the 2020 Neco Economics examination.

Difficulty level: Hard .

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