WAEC Economics 2010 Theory — Question 6

Question 6 of 23 from the West African Examinations Council (WAEC) Economics 2010 Theory paper, with the correct answer and a full explanation.

2(b)(ii) What is the profit maximizing output of the farm? (3 marks)

Model answer

The equilibrium of the firm is the point where MC = MR. Since price is constant ($21), MR = P at equilibrium; this occurs when MC = P = $21, which occurs at output level 4. Thus, the profit maximizing output is 4.

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