Neco 2021 Economics Question 4

Practice essay / theory question 4 from the 2021 Neco Economics examination. This question covers Production .

Neco 2021 Economics Essay / Theory

Topic: Production

Question 4 NECO • 2021 • ECONOMICS • essay

A small manufacturing firm produces two products, A and B, using a common fixed factor (factory space) and variable labour. The total cost functions are: TC_A = 50 + 5q_A + 0.1q_A^2 and TC_B = 30 + 4q_B + 0.2q_B^2, where q_A and q_B are the weekly output levels of A and B respectively. Each unit of A requires 0.5 labour‑hours and each unit of B requires 0.8 labour‑hours. The firm has a maximum of 200 labour‑hours per week. Market prices are ₦20 per unit of A and ₦25 per unit of B. The firm is a price‑taker and wishes to maximise weekly profit.

Question Parts

( a )

Derive the marginal cost (MC) functions for products A and B.

( b )

Determine the profit‑maximising output combination of A and B subject to the labour‑hour constraint. Show the steps you use (you may use the Lagrange multiplier method or logical reasoning).

( c )

Calculate the maximum weekly profit at the optimal output levels found in part (b).

( d )

If the market price of product B rises by 10 % (while all other factors remain unchanged), discuss qualitatively and quantitatively how the optimal output mix and the maximum profit would be affected.

Detailed Solution & Marking Scheme

Get the step-by-step solution, key points required by examiners and detailed marking guidance through the Edcrib AI Tutor.

Reveal Answer

About This Question

This is Neco 2021 Economics Question 4. It is one of the essay questions from the 2021 Neco Economics examination.

The question covers Production .

View More Neco 2021 Economics Questions More Neco Practice Questions Back to Questions

Master the Exam!

You've seen a preview, but there are thousands more questions plus AI tutor to break down complex solutions.

Unlock Full Access Available for Android & Windows

Chat with Support