Neco Model Questions Vol1 2021 Economics Question 9

Practice objective / multiple choice question 9 from the 2021 Neco Model Questions Vol1 Economics examination.

Neco Model Questions Vol1 2021 Economics Objective / Multiple Choice Hard Difficulty
Question 9 NECO_MODEL_QUESTIONS_VOL1 • 2021 • ECONOMICS • objective

A firm in the automobile industry has total cost (in million N) given by \( TC = 0.5Q^{2} + 20Q + 100 \), where \(Q\) is output in thousand units. The market demand is \( P = 200 - 0.5Q \). Initially there is no tax.\ (a) Find the profit‑maximising output, the market price, and the profit.\ (b) The government introduces a specific tax of N15 million per unit. Determine the new profit‑maximising output, the consumer price, the price received by the firm, and the new profit.\ (c) Calculate the change in profit and the proportion of the tax burden borne by consumers versus producers (expressed as percentages).

Answer Options

A. a) Q* = 85 (thousand), P* = 152.5 N, Profit = 7,500 million N. b) Q* = 80, Consumer price = 160 N, Producer price = 145 N, Profit = 6,500 million N. c) Profit falls by 1,000 million N; consumers bear 30 % of the tax, producers bear 70 %.
B. a) Q* = 88 (thousand), P* = 154 N, Profit = 7,900 million N. b) Q* = 81, Consumer price = 158 N, Producer price = 143 N, Profit = 6,600 million N. c) Profit falls by 1,300 million N; consumers bear 22 % of the tax, producers bear 78 %.
C. a) Q* = 95 (thousand), P* = 157 N, Profit = 8,200 million N. b) Q* = 85, Consumer price = 159 N, Producer price = 144 N, Profit = 6,800 million N. c) Profit falls by 1,400 million N; consumers bear 20 % of the tax, producers bear 80 %.
Correct Answer D. a) Q* = 90 (thousand), P* = 155 N, Profit = 8,000 million N.\b) Q* = 82.5, Consumer price = 158.75 N, Producer price = 143.75 N, Profit = 6,706.25 million N.\c) Profit falls by 1,293.75 million N; consumers bear 25 % of the tax, producers bear 75 %.
Correct Answer
D
Correct Option:
a) Q* = 90 (thousand), P* = 155 N, Profit = 8,000 million N.\b) Q* = 82.5, Consumer price = 158.75 N, Producer price = 143.75 N, Profit = 6,706.25 million N.\c) Profit falls by 1,293.75 million N; consumers bear 25 % of the tax, producers bear 75 %.

About This Question

This is Neco Model Questions Vol1 2021 Economics Question 9. It is one of the objective questions from the 2021 Neco Model Questions Vol1 Economics examination.

Difficulty level: Hard .

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