passwella.
Menu

JAMB Economics 1991 Question 18

Question 18

Market Structures

The table shows output (Q), total cost (TC) of production and marginal cost (MC) for a firm in a competitive market.
Q (tons): 600, 700, 800, 900, 1000
TC (N): 6800, 8700, 8400, 9600, 11000
MC (N/ton): –, 10, 6, 12, 14
Suppose price (P) = N12, what is the maximum profit the firm can make?

  1. A.N2,000.00
  2. B.N1,200.00
  3. C.N1,000.00
  4. D.N400.00
Show the answer and explanation

Answer: B (N1,200.00)

Explanation

The firm produces where MC = P = N12, i.e. 900 tons. Revenue = 900 × 12 = N10,800; profit = 10,800 − 9,600 = N1,200, the largest in the table.