Neco 2021 Economics Question 5

Practice essay / theory question 5 from the 2021 Neco Economics examination. This question covers Cost and Revenue .

Neco 2021 Economics Essay / Theory

Topic: Cost and Revenue

Question 5 NECO • 2021 • ECONOMICS • essay

A shoe manufacturing firm incurs a fixed cost of ₦200,000 per month. The variable cost per pair of shoes is ₦1,200 for the first 500 pairs produced each month and ₦1,000 for each pair produced beyond the first 500 because of economies of scale. Each pair of shoes is sold at a constant price of ₦2,500.

( a )

Write the total cost (TC) function in terms of the quantity Q of shoes produced per month.

( b )

Determine the break‑even quantity, i.e., the smallest whole number of shoes for which total revenue equals total cost.

( c )

Calculate the profit (or loss) the firm would make if it produced and sold 800 pairs of shoes in a month.

( d )

Explain how the reduction in variable cost after the first 500 pairs affects the average cost and the firm’s incentive to increase output.

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This is Neco 2021 Economics Question 5. It is one of the essay questions from the 2021 Neco Economics examination.

The question covers Cost and Revenue .

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