Neco 2023 Economics Question 5

Practice essay / theory question 5 from the 2023 Neco Economics examination. This question covers Cost and Revenue .

Neco 2023 Economics Essay / Theory

Topic: Cost and Revenue

Question 5 NECO • 2023 • ECONOMICS • essay

A small manufacturing firm produces a single product. Its monthly fixed cost is ₦120,000. The variable cost per unit is given by \(VC = 20Q + 0.05Q^{2}\) where \(Q\) is the quantity produced per month. The market demand for the product is described by the price‑quantity relationship \(P = 500 - 0.2Q\).

Question Parts

( a )

Derive the profit function \(\pi(Q)\) in terms of \(Q\).

( b )

Determine the profit‑maximising output level and the corresponding profit.

( c )

Calculate the quantity (or quantities) at which the firm breaks even (i.e. makes zero profit).

( d )

If the fixed cost rises by 10 %, state the new profit that the firm would earn if it continues to produce at the output level found in part (b). Comment briefly on the effect of the increase in fixed cost on the firm’s profitability.

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About This Question

This is Neco 2023 Economics Question 5. It is one of the essay questions from the 2023 Neco Economics examination.

The question covers Cost and Revenue .

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