Neco 2024 Economics Question 12

Practice objective / multiple choice question 12 from the 2024 Neco Economics examination.

Neco 2024 Economics Objective / Multiple Choice Hard Difficulty
Question 12 NECO • 2024 • ECONOMICS • objective

A firm can transport its product either by road truck or by rail. For a distance of 800 km the cost functions are: Road - fixed cost \(F_r = \₦150\,000\) and variable cost \(v_r = \₦45\) per tonne‑km. Rail - fixed cost \(F_{ra}=\₦5\,000\,000\) and variable cost \(v_{ra}=\₦30\) per tonne‑km. The firm ships between 200 and 800 tonnes per trip. \( (a)\) Find the smallest shipment size (in tonnes) for which rail transport is cheaper than road. \( (b)\) If the firm ships 600 tonnes, calculate the cost saving (or extra cost) when using rail instead of road.

Answer Options

A. Rail becomes cheaper for shipments larger than 350.0 tonnes (i.e., at least 351 tonnes). For a 600‑tonne shipment rail saves \₦1 800 000 compared with road.
B. Rail becomes cheaper for shipments larger than 500 tonnes (i.e., at least 501 tonnes). For a 600‑tonne shipment rail saves \₦2 100 000 compared with road.
Correct Answer C. Rail becomes cheaper for shipments larger than 404.2 tonnes (i.e., at least 405 tonnes). For a 600‑tonne shipment rail saves \₦2 350 000 compared with road.
D. Rail becomes cheaper for shipments larger than 450.5 tonnes (i.e., at least 451 tonnes). For a 600‑tonne shipment rail saves \₦2 800 000 compared with road.
Correct Answer
C
Correct Option:
Rail becomes cheaper for shipments larger than 404.2 tonnes (i.e., at least 405 tonnes). For a 600‑tonne shipment rail saves \₦2 350 000 compared with road.

About This Question

This is Neco 2024 Economics Question 12. It is one of the objective questions from the 2024 Neco Economics examination.

Difficulty level: Hard .

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