Neco 2023 Economics Question 21

Practice objective / multiple choice question 21 from the 2023 Neco Economics examination.

Neco 2023 Economics Objective / Multiple Choice Hard Difficulty
Question 21 NECO • 2023 • ECONOMICS • objective

An inter‑city bus company has a fixed monthly cost of ₦500,000 and a variable cost of ₦200 per passenger. When the ticket price is set at ₦800, the company carries 2,000 passengers per month. The price‑elasticity of demand for the service is 1.5, so a percentage change in price leads to a percentage change in quantity given by \(\%\Delta Q = -\varepsilon \times \%\Delta P\). The company may reduce the ticket price by a certain percentage \(r\) (expressed as a decimal) to increase ridership. Determine the percentage price reduction that maximises monthly profit and compute the corresponding maximum profit (rounded to the nearest naira).

Answer Options

Correct Answer A. Optimal price reduction ≈ 4.17 % and maximum profit ≈ ₦704,167
B. Optimal price reduction ≈ 3.50 % and maximum profit ≈ ₦710,000
C. Optimal price reduction ≈ 5.00 % and maximum profit ≈ ₦690,000
D. Optimal price reduction ≈ 6.25 % and maximum profit ≈ ₦680,000
Correct Answer
A
Correct Option:
Optimal price reduction ≈ 4.17 % and maximum profit ≈ ₦704,167

About This Question

This is Neco 2023 Economics Question 21. It is one of the objective questions from the 2023 Neco Economics examination.

Difficulty level: Hard .

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