1. (a)Mawibekiri
Nigeria Limited provides the following information as contained in the
table below:
|
Output
|
Fixed
Cost
|
Variable Cost
|
Total
Cost
|
Average
Cost
|
Marginal
Cost
|
|
10
30
40
50
60
70
80
|
1,000
1,000
1,000
1,000
1,000
1,000
1,000
|
500
1,300
1,500
1,600
2,000
3,200
5,000
|
|
|
|
Required: Copy and complete the above table.
(b) Distinguish between Accountant`s view of cost
and Economist`s view of cost.
SUGGESTED
SOLUTION
1.(a)
|
Output
|
Fixed
Cost
|
Variable Cost
|
Total
Cost
|
Average
Cost
|
Marginal
Cost
|
|
10
30
40
50
60
70
80
|
1,000
1,000
1,000
1,000
1,000
1,000
1,000
|
500
1,300
1,500
1,600
2,000
3,200
5,000
|
1,500
2,300
2,500
2,600
3,000
4,200
6,000
|
150
76.67
62.5
52
50
60
75
|
-
40
20
10
40
120
180
|
NOTICE:
Total Cost =
Fixed Cost + Variable Cost
Average Cost
= Total Cost
Output
Marginal Cost = Change
in Total Cost
Change in Output
(b) Accountant`s view cost in terms of the amount of
money spent in order to have a commodity or service. That is, the Accountant`s
view cost in term of payment which known as money cost in Economics.
Economist`s view cost on the other hand, in term of
the alternative forgone which is known in Economics as opportunity cost not
necessarily in terms of expenditure incurred.
2.(a) Distinguish between a change in supply for a
commodity and a change in quantity supplied for a commodity.
(b) Given the demand and supply equations for a
commodity as:
Q= 200 – 0.2P
S = 50 + 0.3P
Determine:
i. Equilibrium Price and Quantity.
ii. Excess supply if the price increases to N360
iii. Excess demand if the price decreases to N240
2.(a) A
change in supply for a commodity is when different quantities of goods or
services are supplied at a particular price. A change in supply brings about a
shift in the supply curve either to the right or to the left. A shift of the
supply curve to the right indicates an increase in supply while a shift to the
left shows a decrease in supply. These can be illustrated with the diagrams (CHECK YOUR SCHOOL NOTE).
While Change in
quantity supplied is when there is a rise or a fall in price of the commodity that will
bring about increase or decrease in the
quantity supplied of a commodity. A fall in price of a commodity will result in
decrease in the quantity supplied which is known in Economics as contraction of
supply and a rise in price of a commodity will bring about increase in the
quantity supplied and which is known in Economics as expansion or extension of
supply.
These can be illustrated with the diagrams (CHECK YOUR SCHOOL NOTE).
(b) i. Q= 200 – 0.2p
S= 50 + 0.3P
Q = S
200- 0.2P = 50 + 0.3P
200-50 = 0.3P + 0.2P
150 = 0.5P
P = 150 =
N300
0.5
Q= 200 – 0.2p
Q = 200 – 0.2(300)
Q = 200- 60 = 140units
S= 50 + 0.3P
S = 50 +0.3 (300)
S = 50 + 90 = 140units
The Equilibrium Price = N300
The Equilibrium Quantity is
140units
ii. Excess supply if the price increases to N360
Q= 200 – 0.2p
Q = 200 – 0.2(360)
Q = 200- 72 = 128units
S= 50 + 0.3P
S = 50 +0.3 (360)
S = 50 + 108 = 158units
Excess supply = S-Q
Excess supply= 158 – 128 = 30units
iii. Excess demand if the price decreases to N240
Q= 200 – 0.2p
Q = 200 – 0.2(240)
Q = 200- 48 = 152units
S= 50 + 0.3P
S = 50 +0.3 (240)
S = 50 + 72 = 122units
Excess Demand = Q-S
Excess Demand= 152 – 122 = 30units
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