Economics Paper 2, May/June 2013
 Questions: 1 2 3 4 5 6 7 8 9 10 11 12 Main
Weakness/Remedies
Strength

QUESTION 1

The output and cost of production of rice (in bags) are presented in the table below. Use the information in the table to answer the questions that follow:

 Output of rice (in bags 0 1 2 3 4 Total Variable          Cost(TVC) \$ 0 5 7 10 20 Total Cost(TC) \$ 7 12 14 17 27

Calculate the

Average Fixed Cost (AFC) at output levels 0, 2 and 4.
Marginal Cost (MC) at all levels of output.

If the price of a bag of rice were \$ 10,

calculate the profit/loss at all levels of output.
at what output level(s) is the maximum profit made?

Draw the marginal cost curve (the use of graph is essential).

OBSERVATIONS

This question attracted many candidates and they performed a little above average. The question required the candidates to calculate Average Fixed Cost (AFC) and Marginal Cost (MC) and determine the profit/loss at different levels of output. Some of the candidates could not apply the appropriate formulae and draw the Marginal Cost (MC) curve. This prevented them from obtaining the maximum mark.