Basis Math1 Sol PDF

Solutions to
Mathematics for
Business Economics
Herbert Hamers
Bob Kaper
John Kleppe
Preface
We thank Daniel Neuhann and Chao Hui Koo for their contributions to this solution
manual. Furthermore, we thank Elleke Janssen for help with LATEX-related issues.
If you find mistakes or possible improvements, please notify your tutorial teacher or
send an e-mail to the coordinator Jop Schouten (j.schouten@tilburguniversity.edu).
UPDATE 2020: in this solution manual, the solutions of Chapter 1 - 6 of the both
the second and the third edition of the book can be found. If an exercise is numbered
different in both editions, this is indicated.
Herbert Hamers
Bob Kaper
John Kleppe
Tilburg, June 2012
iii
Contents
Preface iii
1 Solutions to Chapter 1 1
7 Figures 77
v
Solutions to Chapter 1
1
Exercise 1.1
a) To sketch a linear function, we need two points on this line. Consider the function y(x) =
3x + 2. First, we find two points which satisfy the function, e.g.,
If x = 0, y = 3 · 0 + 2 = 2.
2
If y = 0, 0 = 3x + 2 ⇒ x = − .
3
Then, we plot the points (0, 2) and (− 32 , 0) and draw a straight line passing through these
two points on a coordinate plane. Similarly, we do the same for z(x) = −5x + 4. The
graphs of y(x) and z(x) are shown in Chapter 7.
b) The zero of y(x) is the solution of
3x + 2 = 0 ⇔ 3x = −2
2
⇔x=− .
3
And, the zero of z(x) is given by
−5x + 4 = 0 ⇔ − 5x = −4
4
⇔x= .
5
c) We use part b) and obtain that (− 23 , 0) is the intersection point with the x-axis for the
graph of the function y(x). Similarly, ( 54 , 0) is the intersection point with the x-axis for the
graph of the function z(x).
d) It holds that y(0) = 2. Hence, the intersection point with the y-axis for the graph of the
function y(x) is (0, 2). Similarly, (0, 4) is the intersection point with the y-axis for the
graph of the function z(x).
e) To determine the intersection point, we solve
y( x ) = z( x ) ⇔ 3x + 2 = −5x + 4
⇔ 8x = 2
1
⇔x= .
4

Since y( 14 ) = z( 41 ) = 2 34 , the point of intersection is 1 3
4,24 .
1
2 Solutions
Exercise 1.2
9−4
a = = 5, which gives y( x ) = 5x + b. Since we know that y(2) = 5 · 2 + b = 4, we
3−2
obtain that b = −6. Hence, a = 5 and b = −6.
Exercise 1.3
a) Since y(x) = x2 + 7x + 6, D = 49 − 24 = 25 > 0. According to the abc-formula, the two
zeros are given by
√
−7 ± 25
x= = −1 and − 6.
2
b) Since y(x) = 4x2 + 2x + 1, D = 4 − 16 = −12 < 0. There are no zeros in this case.
Exercise 1.4
a) To sketch a quadratic function, we need to determine the zeros and/or the locations of
extremum. In this exercise, we solve for the zeros only. The zeros of y(x) = x2 + 4x + 3
are given by
√
−4 ± 16 − 12
x= = −1 and − 3.
2
Using the sign survey of y(x), we know which regions of x give positive/negative func-
tion values. This information determines whether the quadratic function is U-shaped or
mountain-shaped. Finally, we draw a U-shaped or mountain-shaped smooth curve which
passes through (−1,√ 0) and (−3,√ 0). Similarly, we do the same for z( x ) = − x2 + 6. The
zeros of z(x) are (− 6, 0) and ( 6, 0). The graphs of y(x) and z(x) are shown in Chap-
ter 7.
b) The points of intersection are the solutions of
y( x ) = z( x ) ⇔ x2 + 4x + 3 = − x2 + 6
⇔ 2x2 + 4x − 3 = 0.
According to the abc-formula, we have
√ √ √
−4 ± 40 4 4 10 √
x= =− ± = −1 ± 12 10.
4 4 4
√ √ √ √
Since z(−1 − 2 10) = 2 2 − 10 and z(−1 + 12 10) = 2 12 + 10,
1 1 the points of intersec-
tion are

1√ 1 √ 1√ 1 √
( x, y) = −1 − 10, 2 − 10 and ( x, y) = −1 + 10, 2 + 10 .
2 2 2 2
Exercise 1.5
a) h( x ) = f ( x ) − g( x ) = (2x + 4) − (2x2 + 3x + 4) = −2x2 − x.
h( x ) = 0 ⇔ − 2x2 − x = 0
⇔ x (−2x − 1) = 0
⇔ x = 0 or (−2x − 1) = 0
⇔x=0 or x = − 12 .
From the sign survey of h(x), it follows that f ( x ) ≥ g( x ) if − 21 ≤ x ≤ 0.
Chapter 1 3
√
b) The points of intersection are given by x = −1 ± 21 10. (See Exercise
√
1.4). From the√sign
survey of f (x) − g(x), it follows that f (x) ≥ g(x) if x ≤ −1 − 21 10 or x ≥ −1 + 21 10.
c) h(x) = f (x) − g(x) = x2 − (5x − 4) = x2 − 5x + 4.
h( x ) = 0 ⇔ x2 − 5x + 4 = 0
⇔ x = 1 or x = 4.
From the sign survey of h(x), it follows that f ( x ) < g( x ) if 1 < x < 4.
Exercise 1.6
a) For a quadratic function to have two zeros, we
√ need D = b√ − 4ac > 0. Since y( x ) =
2
x + px + 3, D = p − 12. D > 0 implies p > 12 or p < − 12.

2 2
b) For a quadratic function to have two zeros, we need D = b2 − 4ac > 0. Since y(x) =
p2 x2 + 2px + 1, D = 4p2 − 4p2 = 0. The discriminant is always equal to zero no matter
what p is. Therefore, no such p exists.
Exercise 1.7
a)
x3 − 2x2 + x = 0 ⇔ x ( x2 − 2x + 1) = 0
⇔ x ( x − 1)2 = 0
⇔x=0 or x = 1.
b)
x 4 − x 2 + x ( x 2 − 1) = 0 ⇔ x 2 ( x 2 − 1) + x ( x 2 − 1) = 0
⇔ ( x2 + x )( x2 − 1) = 0
⇔ x ( x + 1)( x2 − 1) = 0
⇔ x = 0, x = 1 or x = −1.
c) Substitute x2 = p. Then 3p2 − 7p + 2 = 0 gives p = 2 or p = 13 . Hence, x2 = 1

3 gives
q q √ √
x = − 31 or x = 13 , while x2 = 2 results in x = − 2 and x = 2.
Exercise 1.8
a) 8 = 23 . Hence, p = 3.
b) 8 3 = (23 ) 3 = 24 . Hence, p = 4.
4 4
√ √
c) 32 = 25 = (25 ) 2 = 2 2 . Hence, p =
1 5
5
2 .
d) 64 − 21 = (26 ) − 12 = 2− 3 . Hence, p = −3.
Exercise 1.9
a) x2 x5 yy2 = x2+5 y1+2 = x7 y3 . Hence, p = 7, q = 3.
1
xx 3 y2
b) − 2
− 1
= x1 x 3 y2 x 3 y1 = x1+ 3 + 3 y2+1 = x2 y3 . Hence, p = 2, q = 3.
1 2 1 2
x 3y
c) ( x −1 y4 )2 = ( x −1 )2 (y4 )2 = x −2 y8 . Hence, p = −2, q = 8.
10 √
d) x 6 3 x = x 6 x 3 = x 6 = x2 y0 . Hence, p = 2, q = 0.
10 1 12
Exercise 1.10
1 3 7
x8x4 x8
a) 1 7 = 3
1
= x− 2 = 2 and hence, x = 2−2 = 41 .
x2x8 x1 8
4 Solutions
1
x2 x 2
b) gives x2 6 = 8x 3 . Hence, x1 21 = 8, which implies x = 8 3 = 4.
2 1 2 2
1
= x3
8x 3
Exercise 1.11
a0 1
a − x = a0− x = = x, with the first equality sign following from property 2, and the third
ax a
from property 5.
Exercise 1.12
a) 2x = 44x +6 ⇔ 2x = (22 )4x +6
⇔ 2x = 28x +12
⇔ x = 8x + 12
⇔ 7x = −12
⇔ x = − 12
7 .
b) 1
272x = ( )− x +2 ⇔ (33 )2x = (3−1 )2− x
3
⇔ 36x = 3x −2
⇔ 6x = x − 2
⇔ x = − 52 .
c) x 2 −1
1
x 2 −1 0
1 1
=1 ⇔ =
4 4 4
⇔ x2 − 1 = 0
⇔ x2 = 1
⇔ x = −1 or x = 1.
Exercise 1.13
The x-coordinate of the point of intersection is a solution of
y1 ( x ) = y2 ( x ) ⇔ 3x +2 = 24 + 3x
⇔ 3x +2 − 3x = 24
⇔ 3x (32 − 1) = 24
⇔ 8(3x ) = 24
⇔ 3x = 3
⇔ x = 1.
Hence, the intersection point is (1, y1 (1)) = (1, 27).

Exercise 1.14
log( 1x ) = log 1 − log x = 0 − log x = − log x, where the fist equality sign follows from property
2, and the second from property 4.
Exercise 1.15
a)
log x + 2 log y = log x + log y2 = log xy2 .
Chapter 1 5
b) 1 1
log x + log − log z = log x + log + log z−1
y y
1 1
= log x + log + log
y z
1 1 x
= log( x · · ) = log .
y z yz
Exercise 1.16
a) ln( x + 7) + ln( x + 3) = 0 ⇔ ln(( x + 7)( x + 3)) = 0
⇔ ln(( x + 7)( x + 3)) = ln 1
⇔ ( x + 7)( x + 3) = 1
⇔ x2 + 10x + 21 = 1
⇔ x2 + 10x + 20 = 0
√
−10 ± 20 √
⇔x= = −5 ± 5.
2
Notice that√ the equation is only defined for x + 3 > 0. Hence, for x > −3. √Thereby,
x = −5 − 5 is not part of the domain, and the only valid solution is x = −5 + 5.
b) Substitute 3 log x by p. Then we obtain p2 + 6 = 5p. Hence,
p2 + 6 = 5p ⇔ p2 + −5p + 6 = 0
√
5 ± 25 − 24
⇔p=
2
⇔ p = 52 ± 12
⇔p=2 or p = 3.
Hence, 3 log x = 2, which gives x = 32 = 9, or 3 log x = 3, which gives x = 33 = 27.
Hence, x = 9 or x = 27.
Exercise 1.17
6 log 81 6 log 81
= 6 log(81 2 ) = 6 log 9. Hence, x = 9.
1
36 log 81 = = = 1 6 log 81
6 log 36 2 2
Exercise 1.18
The break-even point is the point where R(x) = C (x).
R( x ) = C ( x ) ⇔ px = c + vx
⇔ px − vx = c
⇔ ( p − v) x = c
c
⇔x= .
p−v
Exercise 1.19
a) q d ( p) = ap + b. We know that a · 220 + b = 180 and a · 160 + b = 240. Subtracting these
two equations gives a · 60 = −60, which gives a = −1. Plugging this into one of the two
equations results in b = 400. Hence, qd ( p) = − p + 400, (0 ≤ p ≤ 400).
b) Similar to part a), qs ( p) = 2p − 200, ( p ≥ 100).
6 Solutions
c) See Chapter 7 for the figure.

d) We solve
q d ( p) = q s ( p) ⇔ − p + 400 = 2p − 200
⇔ 3p = 600
⇔ p = 200.
Hence, (q, p) = (200, 200).

Exercise 1.20 in second edition only
Consider the equation x3 − xa = 2. If a = 0, it is a linear equation. Recall that a linear equation
has precisely one solution as long as the slope is different from 0. Therefore, the equation has
precisely one solution if a = 0. If a 6= 0 and x 6= 0, we have
x a x2
− =2 ⇔ − a = 2x
3 x 3
x2
⇔ − 2x − a = 0,
3
which becomes a quadratic equation. A quadratic equation has precisely one solution if D = 0.
In this case, we get
4
D = 4 + a = 0 ⇒ a = −3.
3
As a result, the equation x
3 − a
x =2 has precisely one solution if a = 0 or a = −3.
Exercise 1.20 (Second edition: 1.21)
Since the demand function is q = 60 − 10p, the inverse demand function is p = 6 − 101 q, and
total revenue is given by
1 2
TR(q ) = pq = − q + 6q,
10
and total costs are
C (q ) = 25 + 2q.
At the break-even point, we have

1 2
TR(q ) = C (q ) ⇔ − q + 6q = 25 + 2q
10
1 2
⇔ q − 4q + 25 = 0
10
√
4± 6 √
⇔q= 2
= 20 ± 5 6.
10
For both quantities we

√ have a positive price,
√ which implies that we have two break-even points.
They are q = 20 − 5 6 and q = 20 + 5 6.
Chapter 1 7

h( x ) = x3 + 2x − 3x2 = x3 − 3x2 + 2x.
h( x ) = 0 ⇔ x3 − 3x2 + 2x = 0
⇔ x ( x2 − 3x + 2) = 0
⇔x=0 or x2 − 3x + 2 = 0
√
3± 1
⇔x=0 or x=
2
⇔ x = 0 or x = 1 or x = 2.
From the sign survey of h(x), it follows that x3 + 2x ≤ 3x2 if x ≤ 0 or 1 ≤ x ≤ 2.

a) According to the abc-formula, the zeros of y(x) = 2x2 + 12x + 18 are given by
p
−12 ± 144 − 4(2)(18)
x= = −3.
4
b) Since y(x) = − x2 − x + p = 0, D = 1 + 4p. In order to have two zeros, D has to be

greater than 0, which implies p > − 41 .
c) Two graphs intersect if there exists at least one solution of y1 (x) = y2 (x).
1 2
y1 ( x ) = y2 ( x ) ⇔x − 5x + 6 = 3x + p
4
1
⇔ x2 − 8x + 6 − p = 0.
4
To ensure no intersections, the discriminant of the above quadratic equation should be less
than 0. As a result, we have
D = 64 − 6 + p < 0 ⇒ p < −58.

a) The point of intersection is given by
y1 ( x ) = 3 ⇔ 2 log( x − 2) = 3
2
log( x −2)
⇔2 = 23
⇔ x−2 = 8
⇔ x = 10.
From the sign survey of y1 (x) − 3, it follows that y1 (x) > 3 if x > 10.
8 Solutions
b) h( x ) =2 log( x − 2) +2 log( x + 4) − 2.
h( x ) = 0 ⇔ 2 log( x − 2) +2 log( x + 4) − 2 = 0
⇔ 2 log( x − 2) +2 log( x + 4) = 2
⇔ 2 log(( x − 2)( x + 4)) = 2
⇔ 2 log( x2 + 2x − 8) = 2
⇔ x2 + 2x − 8 = 4
⇔ x2 + 2x − 12 = 0
√
−2 ± 52
⇔x=
2
√
52
⇔ x = −1 ± .
2
√
⇔ x = −1 ± 13.
√
From the sign survey of h(x), it follows that y1 (x) < y2 (x) if 2 < x < −1 + 13.

2−x
a) h( x ) =
3+x
+ x − 1.
2−x
h( x ) = 0 ⇔ = −x + 1
3+x
⇔ 2 − x = (− x + 1)(3 + x )
⇔ 2 − x = − x2 − 2x + 3
⇔ x2 + x − 1 = 0
√
−1 ± 5
⇔x= .
2
√
From the sign√
survey of h ( x ), it follows that f ( x ) ≥ g( x ) if −3 < x ≤ − 21 − 1
2 5 or
x ≥ − 21 + 12 5.
2
b) h(x) = 13−+xx − x − 1.
1 − x2
h( x ) = 0 ⇔ = x+1
3+x
2
⇔ 1 − x = ( x + 1)(3 + x )
⇔ 1 − x2 = 4x + 3 + x2
⇔ 2x2 + 4x + 2 = 0
⇔ x2 + 2x + 1 = 0
⇔ ( x + 1)2 = 0
⇔ x = −1.
From the sign survey of h(x), it follows that h(x) is negative if −3 < x ≤ −1 or x ≥ −1.
Hence, we conclude that f (x) ≤ g(x) if x > −3.
Chapter 1 9

Note that x-axis can be represented by y(x) = 0. The x-coordinate of the intersection point
of y(x) = 0 and y(x) = ex ln(x + 12 ) is the solution of
1 1
e x ln( x + ) = 0 ⇔ |{z}
e x ln( x + ) = 0
2 2
>0
1
⇔ ln( x + ) = 0
2
1
⇔ eln( x + 2 ) = e0
1
⇔ x+ =1
2
1
⇔x= .
2
Hence, the intersection point is (x, y) = ( 12 , 0).

a) The points of intersection are given by
√
y1 ( x ) = y2 ( x ) ⇔ 2x + 3 = x
⇒ 2x + 3 = x2
⇔ x2 − 2x − 3 = 0
√
2 ± 4 + 12
⇔x=
2
⇔ x = −1 or x = 3.
√
Since√we took a square on both sides, we have to check our results: 2 · −1 + 3 = 1 6= −1
and 2 · 3 + 3 = 3. Hence, the only intersection point is (x, y) = (3, 3).
b) From the sign survey of y1 (x) − y2 (x), it follows that y1 (x) < y2 (x) if x > 3.
a)
2 2 2 2
82x · ( 41 )4x = 16 · ( 12 )6x ⇔ (23 )2x · (2−2 )4x = 24 · (2−1 )6x
2 2
⇔ 26x · 2−8x = 24 · 2−6x
2 2
⇔ 2−8x +6x
= 2−6x +4
⇔ −8x2 + 6x = −6x2 + 4
⇔ −2x2 + 6x − 4 = 0
⇔ x2 − 3x + 2 = 0
⇔ ( x − 1)( x − 2) = 0
⇔ x = 1 or x = 2.
10 Solutions
b) h( x ) = ( x2 − 1)( x + 2) + 3( x + 1) ≥ 0
h( x ) = 0 ⇔ ( x2 − 1)( x + 2) + 3( x + 1) = 0
⇔ ( x + 1)( x − 1)( x + 2) + 3( x + 1) = 0

⇔ ( x + 1) ( x − 1)( x + 2) + 3 = 0
⇔ ( x + 1)( x2 + x + 1) = 0
⇔ ( x + 1) = 0 or (x2 + x + 1) = 0.
Then, ( x + 1) = 0 gives x = −1. Further, x2 + x + 1 = 0 leads to D = 12 − 4 · 1 · 1 =
−3 < 0. Hence, no zeros. Using a sign survey (h(−2) = −3 and h(0) = 1) we obtain that
x ≥ −1.
c) h( x ) = 2 · 3 log( x ) − 9 log(8x2 ) + 9 log(81x ) − 2 < 0.
h( x ) = 0 ⇔ 2 · 3 log( x ) − 9 log(8x2 ) + 9 log(81x ) − 2 = 0

⇔ 3 log( x2 ) − 9 log(8x2 ) + 9 log(81x ) − 9 log(81) = 0
8x2 · 81
⇔ 3 log( x2 ) − 9 log( )=0
81x
3 2 9
⇔ log( x ) − log(8x ) = 0
9 log( x2 )
⇔ 9 log(3)
− 9 log(8x ) = 0
9 log( x2 )
⇔ 1
− 9 log(8x ) = 0
2
⇔ 2 · 9 log( x2 ) − 9 log(8x ) = 0
⇔ 9 log( x4 ) − 9 log(8x ) = 0
x4
⇔ 9 log( )=0
8x
x4
⇔ 9 log( ) = 9 log(1)
8x
x4
⇔ =1
8x
3
⇔x =8
⇔ x = 2.
By the sign survey (h(1) = − 9 log 8 < 0 and h(3) = 2 − 9 log 72 + 9 log 243 − 2 > 0) we
obtain that 0 < x < 2.
2
Exercise 2.1
The difference quotient is given by
y( x + ∆x ) − y( x ) y (1 − 3) − y (1)
=
∆x −3
y(−2) − y(1)
=
−3

(−2)2 + 4(−2) + 2 − 12 + 4 · 1 + 2
=
−3
−2 − 7
=
−3
= 3.
Exercise 2.2
Using q( p) = − p2 + 4p + 7 and other information given in the question, we have
q (3 + ∆p) − q (3) 1
=
∆p 2
(−(3 + ∆p)2 + 4(3 + ∆p) + 7) − (−32 + 4 · 3 + 7) 1
⇔ =
∆p 2
−(∆p)2 − 6∆p − 9 + 12 + 4∆p + 7 − 10 1
⇔ =
∆p 2
−(∆p)2 − 2∆p 1
⇔ =
∆p 2
1
⇔ − ∆p − 2 =
2
⇔ ∆p = −2 21 .
11
12 Solutions
Exercise 2.3

y(2 + ∆x ) − y(2) (2 + ∆x )2 + 4 − 22 + 4
=
∆x ∆x
(∆x )2 + 4∆x + 4 + 4 − 8
=
∆x
(∆x )2 + 4∆x
=
∆x
= ∆x + 4.
y(2 + ∆x ) − y(2)
If ∆x → 0, then = 4. Hence, y′ (2) = 4.
∆x
Exercise 2.4
The tangent line is given by y = ax + b, with a = y′ (2) = 4 (see Exercise 2.3). Hence,
y = 4x + b. Furthermore, 8 = 4 · 2 + b, which implies that b = 0. Hence, the tangent line is
given by y = 4x.
Exercise 2.5
a) y( x ) = 1, y′ ( x ) = 0.
b) y( x ) = x3 , y′ ( x ) = 3x2 .
√
c) 1 1
y( x ) = x = x 2 , y′ ( x ) = 12 x − 2 = 2√
1 .
x
d)
1 4
y( x ) = x − 3 , y′ ( x ) = − 31 x − 3 .
Exercise 2.6
a) D ( p) = 1
p = p −1 , D ′ ( p) = − p−2 = − p12 .
Evaluated at p = 3, we have D′ (3) = − 312 = − 91 .
b)
1 4 1
C ( x ) = xx = x ,
3 3 C′ (x) = 43 x 3 .
Evaluated at x = 8, we have C ′ (8) = 43 (8) 3 = 2 23 .
1
c) P (y) = 10y , P ′ (y) = 10y ln 10.

Evaluated at y = 0, we have P′ (0) = ln 10.
d) g( L ) = 2 log L, g′ ( L ) = L ln
1 .
2
Evaluated at L = 4, we have g′ (4) = 1
4 ln 2 .
Exercise 2.7
Since y′ (8) = − 481 , the function value changes approximately by
1 1 1
∆y ≈ y′ (8) · ∆x = − · = − .
48 2 96
Exercise 2.8
3√
The derivative of y(x) is y′ (x) = 2 x . At x = 4, we have y′ (4) = 3, and hence
1
∆y 1
∆x ≈ ′ = 2 = .
y (4) 3 6
Chapter 2 13
Exercise 2.9
a) Applying the sum rule, we have
y( x ) = 5x3 − 15x2 + 18x + 2,
y′ ( x ) = 15x2 − 30x + 18.
b) Applying the product rule twice, we have

y( x ) = ( x − 2)( x − 7)( x − 4),
y′ ( x ) = 1 · ( x − 7)( x − 4) + ( x − 2)(( x − 4) + ( x − 7))
= ( x − 7)( x − 4) + ( x − 2)( x − 4) + ( x − 2)( x − 7).
c) Applying the quotient rule, we have

( x + 5)
y( x ) = ,
( x − 3)
( x − 3) − ( x + 5) 8
y′ ( x ) = =− .
( x − 3)2 ( x − 3)2
d) Rewriting (ex + 3x)2 to (ex + 3x)(ex + 3x) gives us the opportunity to use the product rule.
Hence, we have
y( x ) = (e x + 3x )(e x + 3x ),
y′ ( x ) = (e x + 3)(e x + 3x ) + (e x + 3x )(e x + 3) = 2(e x + 3)(e x + 3x ).
Exercise 2.10
a) Using the quotient rule, we have
(2q2 + 3)
l (q ) = ,
(3q + 5)
4q (3q + 5) − 3(2q2 + 3)
l ′ (q ) = ,
(3q + 5)2
17
l ′ (1) = .
64
b) Using the quotient rule, we have
100
D ( p) = ,
p
100
D ′ ( p) = − ,
( p )2
100
D ′ (5) = − = −4.
25
c) Rewriting (x2 + 7)3 to (x2 + 7)(x2 + 7)(x2 + 7) gives us the opportunity to use the product
rule twice. Hence, we have
C ( x ) = ( x2 + 7)( x2 + 7)( x2 + 7),
C ′ ( x ) = 3( x2 + 7)2 (2x ),
C ′ (1) = 3(64)(2) = 384.
14 Solutions
Exercise 2.11
a) Using the sum rule and the product rule, we obtain
X (y) = y − y ln y,
y
X ′ (y) = 1 − ln y − = − ln y.
y
b) Using the product rule, we obtain
g(u ) = u2 e u ,
g′ (u ) = 2ueu + u2 eu
= (u2 + 2u )eu .
c) Rewriting L(1 + ln L)2 to L(1 + ln L)(1 + ln L) gives us the opportunity to use the product
rule twice. Hence, we have
P ( L ) = L (1 + ln L )(1 + ln L ),
1 1
P ′ ( L ) = (1 + ln L )(1 + ln L ) + L ( (1 + ln L ) + (1 + ln L ) )
L L
= (1 + ln L )(3 + ln L ).
Exercise 2.12
MR(q ) = R′ (q ) = 5 ln q + 5q · 1
q = 5 ln q + 5. Hence, MR(7) = 5 ln(7) + 5.
Exercise 2.13
( ( (
a) D (0) = 10
⇔
b = 10
⇔
b = 10
D (1) = 8 b−a = 8 a = 2.
( ( (
b) D (0) = 10
⇔
b = 10
⇔
b = 10
D (10) = 8 b − 10a = 8 a = 0.2.
c) Since MD(q) = D′ (q) = − a, the marginal demand is −2 in part a) and −0.2 in part b).
Exercise 2.14
a) D (2.525) − D (2.5)
=
135 125
128 − 140.625 119
= − 3600 .
D (2.5) 140.625
Hence, %∆D = −3 3611

.
b) Since D ( p) = −500 + 125p, the elasticity of demand at p = 2.5 is
′
2.5
ǫ = D ′ (2.5) · = −3 31 .
D (2.5)
c) 1
%∆D ≈ ǫ · %∆p ⇔ %∆D ≈ −3 13 · 1% = −3 .
3
d) 1
%∆D ≈ ǫ · %∆p ⇔ −1% ≈ −3 3 %∆p ⇔ %∆p ≈ 3
10 .
Exercise 2.15
Since D′ ( p) = − aαp−α−1, the price elasticity of demand is
p p
ǫ = D ′ ( p) = − aαp−α−1 −α = − α.
D ( p) ap
Chapter 2 15
Exercise 2.16 √ √
L (t) = 3t 2 , hence L′ (t) = 4 12 t, which gives L′ (3) = 4 21 3.
3
Exercise 2.17
a) v( x ) = 2x − 1 and u (v) = ev .
b) v( x ) = x2 − 3 and u (v) = v−1 .
c) v( x ) = x2 + 4 and u (v) = ln(v).
Exercise 2.18
a) y( x ) = e2x −1 ,
y′ ( x ) = e2x −1 2 = 2e2x −1 .
b) y ( x ) = ( x 2 − 3) − 1 ,
y′ ( x ) = ( x2 − 3)−2 · (−2x ) = −2x ( x2 − 3)−2 .
c) y( x ) = ln( x2 + 4)
1 2x
y′ ( x ) = 2 · 2x = 2 .
x2 + 4 2 x +4
y( x ) = x ln( x + 4).
d)
1 2x3
y′ ( x ) = 2x ln( x2 + 4) + x2 · · 2x = 2x ln( x2 + 4) + 2 .
x2 +4 x +4
Note that here we have applied both the chain rule and the product rule.
Exercise 2.19 p
a) r (q ) = 2q 2q − 1,
p 4q p 2q
r ′ (q ) = 2 2q − 1 + p = 2 2q − 1 + p .
2 2q − 1 2q − 1
Evaluated at q = 5, we obtain
√ 10 10
r ′ (5) = 2 10 − 1 + √ = 6+ = 9 13 .
10 − 1 3
b) y( x ) = e2x ,
y′ ( x ) = 2e2x .
Evaluated at x = 2, we obtain
y′ (4) = 2e4
Exercise 2.20
a) To determine the inverse function C ( F ), we solve F (C ) = 9
5 C + 32 for C. We get
9 5 7
F= C + 32 ⇔ C ( F ) = F − 17
5 9 9
b) Simply plugging in the functions gives
9 5 7 160
F (C ( F )) = ( F − 17 ) + 32 = F − + 32 = F
5 9 9 5
and
5 9 7 160 160
C ( F (C )) = ( C + 32) − 17 = C + − = C.
9 5 9 9 9
16 Solutions
Exercise 2.21
a) y( x ) =√x3 ⇔ x (y) = y 3 , (y ≥ 0).
1
b) y( x ) = x ⇔ x (y) = y2 , (y ≥ 0).
c) y( x ) = 2e x ⇔ e x = 2 ⇔ x (y) = ln( 2 ), (y > 0).
y y
√
d) y( x ) = x2 + 4x + 4 = ( x + 2)2 , ( x ≥ 0) ⇔ x (y) = −2 + y, (y ≥ 4).
Exercise 2.22
a) We know that y(1) = 2. Hence, by the definition of the inverse, we also have x(2) = 1.
Furthermore,
y′ ( x ) = 3x2 + 1 ⇒ y ′ (1) = 4
Then it follows that

1 1
x ′ (2) = ′ =
y (1) 4
b) We proceed as above. y (1) = 2 and thus x(2) = 1. The derivative is

1
y′ ( x ) = 2 + ⇒ y ′ (1) = 3
x
and thus
1 1
x ′ (2) = ′ =
y (1) 3
Exercise 2.23
a) The inverse demand function is p(X) = 10 − 2X.
b) The elasticity of demand is given by
p 1 p −p p
ǫ ( X ) = X ′ ( p) =− · p = = .
X ( p) 2 5− 2
10 − p p − 10
c) The elasticity of inverse demand is

X X −X X
ǫ ( p) = p′ ( X ) = −2 · = = .
p( X ) 10 − 2X 5−X X−5
d) At p = 6, The elasticity of demand is ǫ(X) = − 23 . Since X(6) = 2, the elasticity of

inverse demand at X = 2 is ǫ( p) = − 32 . Hence, ǫ(X) = ǫ(1p) holds for p = 6 (and thus
X = X (6) = 2).
Exercise 2.24
If the price increases from 4 to 9, the average increase in demand is
√ √
q (9) − q (4) 9 9−4 4 19
= = = 3 54 .
9−4 5 5
Chapter 2 17
Exercise 2.25
Recall that difference quotient in x at a change ∆x is defined by y( x+∆x∆x)−y(x) . In this question,
we have given y(x) = x2 + 5x + 3 and the difference quotient is equal to 3 in x = a at a change
of ∆x = 3. Using this information and the definition of difference quotient, we have
y ( a + 3) − y ( a ) (( a + 3)2 + 5( a + 3) + 3) − ( a2 + 5a + 3)
=3⇔ =3
3 3
⇔ a2 + 6a + 9 + 5a + 15 + 3 − a2 − 5a − 3 = 9
⇔ 6a + 24 = 9
15
⇔a=− = −2 21 .
6
Exercise 2.26
Since y(x) = x2 + 5x + 6, the slope of the line is equal to
y (3) − y (1) 9 + 15 + 6 − 1 − 5 − 6
= = 9.
3−1 2
Exercise 2.27
Consider the function y(x) = x2 + 7. With the help of the points (a, y(a)) and (b, y(b)), the
slope of the line is equal to
y(b ) − y( a) b 2 + 7 − ( a2 + 7) b 2 − a2 (b − a)(b + a)
= = = = b + a.
b−a b−a b−a b−a
From the exercise, we know that the slope is equal to 5 and b − a = 3. Hence, we have
b + a = 5 and b − a = 3. Solving this system of equations gives
( ( ( (
b+a = 5 b+a = 5 3+a+a = 5 2a = 2
⇔ ⇔ ⇔
b−a = 3 b = 3+a b = 3+a b = 3+a
( ( (
a=1 a=1 a=1
⇔ ⇔ ⇔
b = 3+a b = 3+1 b = 4.
Exercise 2.28
a) Consider the function y(x) = x2
2x +1 . The difference quotient of y(x) in x = 2 at a change
of ∆x = 3 is
y (2 + 3) − y (2) 52 /(10 + 1) − 22 /(4 + 1) 25/11 − 4/5 27

= = = .
3 3 3 55
b) Consider the function y(x) = x2

2x +1 . According to the definition of the difference quotient,
18 Solutions
the difference quotient of y(x) in x = 2 at a change of ∆x is given by

y(2 + ∆x ) − y(2) (2 + ∆x )2 22
= − /∆x
∆x 2(2 + ∆x ) + 1 2(2) + 1

4 + 4∆x + (∆x )2 4 1
= −
5 + 2∆x 5 ∆x
(4 + 4∆x + (∆x )2 )5 − 4(5 + 2∆x ) 1
=
5(5 + 2∆x ) ∆x
20 + 20∆x + 5(∆x )2 − 20 − 8∆x
=
5(5 + 2∆x )∆x
(5∆x + 12)∆x
=
5(5 + 2∆x )∆x
5∆x + 12
= .
5(5 + 2∆x )
As ∆x → 0, the difference quotient becomes
5 · 0 + 12 12
= .
5(5 + 2 · 0) 25
Exercise 2.29
a) Since y(x) = x 12 x 13 = x6,
5
the derivative of y(x) is equal to
5 −1
y′ ( x ) = x 6.
6
Let the tangent line be y = ax + b. To determine a and b, we make use of the following
system of equations:
( (
y ′ (1) = a 5 − 61
⇔ 6 (1) =a
5
y (1) = a (1) + b 16 = a + b
(
a = 65
⇔
1 = a+b
(
a = 65
⇔ 5
b = 1− 6 = 16 .
As a result, the tangent line is given by
y = 65 x + 16 .
b) Since y(x) = 2−x , the derivative of y(x) is
y′ ( x ) = −2− x ln 2.
Let the tangent line be y = ax + b. To determine a and b, we make use of the following
( (
y ′ (1) = a −2−1 ln 2 = a
⇔
y (1) = a (1) + b 2− 1 = a + b
(
a = − 21 ln 2
⇔
b = 12 + 12 ln 2.
Chapter 2 19
As a result, the tangent line is equal to

1 1 1
y = − (ln 2) x + + ln 2.
2 2 2
Exercise 2.30
Since y(x) = x2 + 3x + 4, the derivative of y(x) is
y′ ( x ) = 2x + 3.
The slope of the line through the points (0, 4) and (2, 14) is given by
14 − 4
= 5.
2−0
And, the slope of the tangent line at the tangent point (x0 , y(x0 )) is
a = y′ ( x0 ) = 2x0 + 3.
Because these slopes are the same, we have
5 = 2x0 + 3 ⇔ x0 = 1.
Exercise 2.31
Since y(x) = 2x2 + 2, the derivative of y(x) is
y′ ( x ) = 4x.
Let the tangent line be y = ax + b. First, we know that the tangent line intersects the x-axis
in x = 1. In other words, the point (1, 0) satisfies y = ax + b:
0 = a (1) + b ⇔ a = − b
Hence, the tangent line becomes y = ax − a. To determine a, we make use of the following
( (
y ′ ( x0 ) = a 4x0 = a
⇔
y( x0 ) = ax0 − a 2x02 + 2 = ax0 − a
(
a = 4x0
⇔
2x02 + 2 = (4x0 ) x0 − (4x0 )
(
a = 4x0
⇔
2x02 − 4x0 − 2 = 0
(
a = 4x0
⇔ √
x0 = (4 ± 16 + 16)/4
( √
a = 4(1 ± 2)
⇔ √
x0 = 1 ± 2.
As a result, the tangent lines are given by
√ √
y = 4(1 + 2 ) x − 4(1 + 2)
and
√ √
y = 4(1 − 2 ) x − 4(1 − 2).
20 Solutions
Exercise 2.32
Since y(x) = x3 + 3x2 − 18x + 12, the derivative of y(x) is
y′ ( x ) = 3x2 + 6x − 18.
To find the point of tangency (x0 , y(x0 )), we make use of the following system of equations:
( (
y ′ ( x0 ) = 6 3x02 + 6x0 − 18 = 6
⇔
y( x0 ) = 92 + 6x0 x03 + 3x02 − 18x0 + 12 = 92 + 6x0
(
3x02 + 6x0 − 24 = 0
⇔
x03 + 3x02 − 24x0 − 80 = 0.
Solving the first equation gives

√
−6 ± 36 + 288
3x02 + 6x0 − 24 = 0 ⇔ x0 =
6
⇔ x0 = − 4 or x0 = 2.
Next, we check whether these x0 ’s satisfy the second equation:

For x0 = −4, (−4)3 + 3(−4)2 − 24(−4) − 80 = 0 = 0.
For x0 = 2, (2)3 + 3(2)2 − 24(2) − 80 = −104 6= 0.
Therefore, the only valid point of tangency is (x, y) = (−4, y(−4)) = (−4, 68).
Exercise 2.33
Since y(x) = x3 + px2 + 3x + 2 + p, the derivative of y(x) is
y′ ( x ) = 3x2 + 2px + 3.
The tangent line is horizontal when its slope is zero. Hence, the points of tangency are the
solutions of y′ (x) = 0:
y′ ( x ) = 3x2 + 2px + 3 = 0.
In order to have two solutions (two horizontal tangent lines), we need to have p such that
D > 0. In this case, D = 4p2 − 36 and
D > 0 ⇔ 4p2 − 36 > 0

⇔ p2 > 9
⇔ p < −3 or p > 3.
Thereby, y(x) has two horizontal tangent lines for any p < −3 or p > 3.
Exercise 2.34
Since y(x) = x4 + 2x + a, the derivative of y(x) is
y′ ( x ) = 4x3 + 2.
Chapter 2 21
Given that the tangent line to be y = 6x + 7, we make use of the following system of equations
to determine a:
( (
y ′ ( x0 ) = 6 4x03 + 2 = 6
⇔
y( x0 ) = 6x0 + 7 x04 + 2x0 + a = 6x0 + 7
(
x0 = 1
⇔
a = − x04 + 4x0 + 7
(
x0 = 1
⇔
a = 10.
Exercise 2.35
4x 3
y( x ) = x2 ln( x4 + 3), y′ ( x ) = 2x ln( x4 + 3) + x2 · x 4 +3
.
Evaluated at x = 1, we have y′ (1) = 2 ln 4 + 1.
Exercise 2.36
a) Applying the product rule and the chain rule, we obtain
y( x ) = x2 e x ,
y′ ( x ) = 2xe x + x2 e x ,
y′ (1) = 2e + e = 3e.
b) The tangent line is horizontal when its slope is zero. Hence, we find x such that y′ (x) = 0:
y′ ( x ) = 0 ⇔ 2xe x + x2 e x = 0
e x (2x + x2 ) = 0
⇔ |{z}
>0
⇔ 2x + x2 = 0
⇔ x (2 + x ) = 0
⇔x=0 or x = −2.
Exercise 2.37
Using the chain rule and the product rule, we have
1
y( x ) = e x ln( x + ),
2
1 ex
y′ ( x ) = e x ln( x + ) + ,
2 x + 12
1
y′ (0) = ln( ) + 2.
2
22 Solutions
Exercise 2.38
a) Applying the chain rule, we have
p 1
y( x ) = x 2 + 2 = ( x 2 + 2) 2 ,
1 2 1 x
y′ ( x ) = ( x + 2)− 2 · 2x = √ ,
2 2
x +2
1
y ′ (1) = √ .
3
b) The tangent line is horizontal when its slope is zero. Hence, we determine x such that
y′ ( x ) = 0:
x
y′ ( x ) = 0 ⇔ √ =0
x2 + 2
⇔ x = 0.
Exercise 2.39
a) Using the product rule and the chain rule, we have
y( x ) = x2 e− x ,
y′ ( x ) = 2xe− x − x2 e− x ,
1
y′ (1) = 2e−1 − e−1 = e−1 = .
e
b) The tangent line is horizontal when its slope is zero. Hence, we find x such that y′ (x) = 0:
y′ ( x ) = 0 ⇔ 2xe− x − x2 e− x = 0
e− x (2x − x2 ) = 0
⇔ |{z}
>0
⇔ (2x − x2 ) = 0
⇔ x (2 − x ) = 0
⇔ x = 0 or x = 2.
Exercise 2.40
Applying the chain rule and the product rule, we obtain
2 1
y( x ) = e x ln(2x + ),
2
2 1 2 1
y′ ( x ) = 2xe x ln(2x + ) + e x · 1
· 2,
2 2x + 2
y′ (0) = 4.
Exercise 2.41
p p
a) ǫ(r ) = (d( p) + pd′ ( p))
pd( p)
= 1 + d′ ( p)
d( p)
= 1 + ǫ ( d ).
b) ǫ(r ) = −2 2 implies that ǫ(d) = −3 2 . Then %∆d ≈ ǫ(d) · %∆p
1 1
gives
%∆d ≈ −3 12 · 2 = −7.
Chapter 2 23
Exercise 2.42
R(q ) = −20q2 + 1200q gives MR(q) = R′ (q) = −40q + 1200. Hence, MR(10) = 800.
Exercise 2.43
a) 1 = y(1 + ∆x ) − y(1) ≈ y′ (1)∆x.
4x3 · e3x +1 − x4 · 3 · e3x +1 4x3 − 3x4
y′ ( x ) = +
= .
(e 3x 1 ) 2 e3x +1
Hence, y′ (1) = 14 . Hence, 1 ≈ 14 ∆x and ∆x ≈ e4 .
e e
1 1 4
b) ′
ǫ = y (1) · = 4 · e = 1. Hence, 3 ≈ 1 · %∆x, which gives %∆x ≈ 3.
y (1) e
Exercise 2.44
a) %∆y ≈ ǫ(y) · %∆x gives −2 ≈ ǫ(y) · 5. Hence, ǫ(y) = − 52 .
1
b) ǫ( x ) = 2 = −2 21 .
−5
c) 8 ≈ − 52 · %∆x gives %∆x ≈ −20.
Exercise 2.45
10(1 + e−0.1t ) − 10t(−0.1e−0.1t ) (10 + t)e−0.1t + 10
a) MP (t) = P ′ (t) = −
= .
(1 + e 0.1t ) 2 (1 + e−0.1t )2
b) MP (10) = 20e
− 1 +10
( 1+ e − 1 ) 2
.
Exercise 2.46
a)
1 1
y= +1 ⇔ y−1 =
x+1 x+1
1
⇔ x+1 =
y−1
1
⇔x= − 1.
y−1
Hence, x(y) = 1
y −1 −1 = 1
y −1 −
y −1
y −1 =
2− y
y −1 , 1 < y < 2.
b)
x − 20
y= + 4 ⇔ (y − 4)( x + 5) = x − 20
x+5
⇔ yx + 5y − 4x − 20 = x − 20
⇔ yx + 5y − 4x = x
⇔ yx − 5x = −5y
⇔ x (y − 5) = −5y
−5y
⇔x= .
y−5
Hence, x(y) = −5y

y −5 =
5y
5− y .
24 Solutions
Exercise 2.47
a)
3
y = 4 x −2 ⇔ 4
log(y) = x3 − 2
⇔ x3 = 4 log(y) + 2
q
⇔ x = 3 4 log(y) + 2.
q 2
(4 log( y )+2) − 3
Hence, .Then ,
2
x (y) = 3 4 log( y) + 2 x ′ (y) = 1 4
3 ( log( y) + 2) − 3 · 1
y ln 4 = 3y ln(4)
(y > 1
16 ) .
b)
x+7
y= ⇔ y ( x − 2) = x + 7
x−2
⇔ yx − 2y = x + 7
⇔ yx − x = 7 + 2y
⇔ x (y − 1) = 7 + 2y
7 + 2y
⇔x= .
y−1
Hence, x(y) = 7+2y

y −1 . Therefore, x′ (y) = 2( y −1)−(7+2y )
( y −1) 2
= −9
( y −1) 2
.
Exercise 2.48
a) y(1) = 2. y′ (x) = 2007x2006 + 1. y′ (1) = 2008. Hence, x′ (2) = 2008 1 .
b) y(0) = 1. y (x) = 3x − 4x + 2 + 4 ln 4. y (0) = 2 + ln 4. Hence, x′ (1) = ln(41)+2 .

′ 2 x ′
c) y(1) = − ln 2. y′ (x) = x+x 1 · x( x++11−)x2 = ( x+11) x . y′ (1) = 12 . Hence, x′ (− ln 2) = 11 = 2.

d) The inverse is not determined. With the addition x ≥ 0 we can solve this exercise.
2
y= 5
log( x2 + 3) ⇔ 5y = x2 + 3
⇔ x 2 = 5y − 3
√
⇔ x = 5y − 3.
√ 1
Hence, x(y) = 5y − 3, (y ≥ 5 log 3) . Then x′ (y) = √ · 5y ln 5
2 5y − 3
and x′ (2) = ln(5)
25 √
2 22
.
Exercise 2.49
√ 1
1 12 L1 2 + L
a) ǫ = Y′ ( L) · L
YL = (1 12 L + 1) · √ L
L L+ L
= 1 .
L1 2 +L
b) %Y ≈ ǫ · %∆L, with ǫ = 1 49 and %∆Y = 3 gives %∆L ≈ 2 131 .
3
Exercise 3.1
a)
z(0, 0) = 6 − 0 − 0 = 6,
z(6, 0) = 6 − 6 − 0 = 0,
z(0, 6) = 6 − 0 − 6 = 0,
z(2, 4) = 6 − 2 − 4 = 0,
z(4, 2) = 6 − 4 − 2 = 0.
b) For example (x, y) = (5, 0), (x, y) = (0, 5) and (x, y) = (10, −5).
Exercise 3.2
a) Consider the function z(x1 , x2 ) = x12 x2 . To draw the level curve with function value 2, we
set z = 2 and solve for variable x2 . The level curve is
2
x2 =
x12
and is shown in Chapter 7.
b) i) The function is z(x, y) = x2 + y. For an arbitrary level z = k, the level curve is given by
y = k − x2 .
The level curves with different function values k are shown in Chapter 7.
ii) To compute all the function values such that z(x, y) crosses the x-axis twice, we need
to guarantee that y = k − x2 has two zeros. Since the discriminant of the equation is
D = 02 − 4(−1)(k) = 4k, we have
D > 0 ⇒ k > 0.
2xy
c) Consider the function z( x, y) =
x+y
. When the function value equals to 4, the level
curve becomes
2xy
= 4 ⇔ 2xy = 4x + 4y
x+y
⇔ xy = 2x + 2y
⇔ xy − 2y = 2x
⇔ y( x − 2) = 2x
2x
⇔y= ,
x−2
25
26 Solutions
x > 2. See Chapter 7 for the corresponding figure.

Exercise 3.3
Consider the function 4 ln L + 2 ln K = 10. Solving this for variable K gives
4 ln L + 2 ln K = 10 ⇔ 2 ln K = 10 − 4 ln L
⇔ ln K = 5 − 2 ln L
⇔ eln K = e5−2 ln L
⇔ K = e5 e−2 ln L
−2
⇔ K = e5 eln L
⇔ K = e5 L −2
e5
⇔K= ,
L2
L > 0.
Exercise 3.4
a)
√
5
q
3 2
2 = 2 x 2 5 y3 ⇔ y 5 = 2
2x 5
1
⇔y= √ 3
.
x2
5 5
if U = 2. Similarly, √32 3x2 if U = 4 and √33 3x2 if U = 6.
b) See Chapter 7 for the corresponding figure.
Exercise 3.5
a) For example ( x, y) = (10, 10), ( x, y) = (20, 10), ( x, y) = (100, 10), ( x, y) = (10, 50),
( x, y) = (10, 1000).
b) See Chapter 7 for the corresponding figure.
c) The most preferred ratio is 1 : 1, as this ratio guarantees that there is no ‘waste’. To see
this, consider U (15, 515) = U (15, 15) = 15. There is no benefit of having additional 500
units of y, if there is no increase in the units of x. As long as both commodities are costly,
it only makes sense to consume them in equal amounts.
Exercise 3.6
a) U A (0.5, 0.4) = −0.14 < 0.04 = U A (0.2, 0.2) Hence, Portfolio P2 .
b) UB (0.5, 0.4) = 0.18 > 0.12 = UB (0.2, 0.2). Hence, Portfolio P1 .
c) µ = U A + 4σ2 for investor A, µ = UB + 2σ2 for investor B. See Chapter 7 for the
corresponding figure.
d) α A = 8 > 4 = αB . Hence, investor A.
Exercise 3.7
a) Solving the budget equation for variable x2 gives
p1 I
x2 = − x + .
p2 1 p2
b) Suppose we have strictly positive prices for both goods. To get as much of good 1 as
possible, the consumer can spend all his/her income on good 1. Hence, the maximum
Chapter 3 27
amount of x1 is I/p1 . Similarly, the maximum amount of good 2 the consumer can afford
is I/p2 .
c) The budget line rotates inwards on the (x1 , x2 )-plane. The slope becomes steeper as the
maximum amount of good 1 the consumer can buy decreases.
d) The budget line rotates outwards. The budget line becomes steeper, because the maximum
amount of good 2 that the consumer can buy increases.
e) If the budget increases, the consumer is able to buy more of both goods. Hence, the entire
budget line shifts outwards symmetrically, such that the slope remains the same.
Exercise 3.8
The level curve with the function value 1 is given by
√ √
e− x + y
= 1 ⇔ ln(e− x + y ) = ln 1
√
⇔ −x+ y=0
√
⇔ y=x
⇔ y = x2 , x ≥ 0.
Exercise 3.9
a) Since U (3, 0) = 3a = 9, we have a = 3.
b) The budget restriction is px x + py y = x + y = 3. Thereby, we know that px = py = 1, i.e.,
both goods are equally expensive and have price 1. Furthermore, with a = 3, the consumer
gets 3 units of utility for every unit of x he/she consumes, and 2 units of utility for every
unit of y he/she consumes. Hence, he/she is always better off consuming x than y. This
implies that he/she should spend all his/her income on x, and none on y. According to
the budget constraint, he/she will buy 3 units of x and 0 units of y. This gives him/her
a utility of 9. Hence, it is indeed the case that U (3, 0) = 9 is the maximum utility the
consumer can achieve.
Exercise 3.10
a) The isoquant is min{2x1 , x2 } = 12. We know that the level curve of the minimum function
is always L-shaped. Hence, to draw the level curve, we only need to determine the corner
point of the L-shaped curve, which is given by
12 = 2x1 ⇒ x1 = 6,
12 = x2 ⇒ x2 = 12.
See Chapter 7 for the corresponding figure.

b) The isoquant is min{x1 , 3x2 } = 12. The corner point of the L-shaped curve is given by
12 = x1 ⇒ x1 = 12,
12 = 3x2 ⇒ x2 = 4.
See Chapter 7 for the corresponding figure.

c) As long as the costs for both input factors are strictly positive, the cost-minimizing input
combination is in the corner point. Therefore, if a = 2 and b = 1, we require x1 = 6 and
x2 = 12. At prices p1 = 2 and p2 = 3, this gives costs of production of 6 · 2 + 12 · 3 = 48.
If a = 1 and b = 3, we need x1 = 12 and x2 = 4. At prices p1 = 2 and p2 = 3, the costs
of production are 12 · 2 + 4 · 3 = 36.
28 Solutions
Exercise 3.11 q
a) 3 = 9LK 2 ⇔ K 2 = 3
9L ⇔K= 1
3L . See Chapter 7 for the corresponding figure.
b) 6 = 9L · 22 ⇔L= 1
6.
Exercise 3.12
a) x = 8 and y ≥ 3, or y = 3 and x ≥√ 8. See Chapter 7 for the corresponding figure.
b) k = min{9, y2 } ⇔ k = y2 ⇔ y = k.
c) With x = 8 it is not possible to have k > 9, but k = 9 for all y ≥ 3.
Exercise 3.13
a) 4− 1
2 · 0.52 = 5 − 12 a2 ⇔ 3 78 = 5 − 12 a2 ⇔ a = 1 12 .
b) 4− 1
2 · 0.52 > b − 12 · 0.252 ⇔ b < 3 32
29
.
4
Exercise 4.1
a) z′x ( x, y) = 2y − 10x, z′y ( x, y) = 2x + 1.
b) z′x ( x, y) = 6(1 − x2 y)5 (−2xy) = −12xy(1 − x2 y)5 ,
z′y ( x, y) = 6(1 − x2 y)5 (− x2 ) = −6x2 (1 − x2 y)5 .
c)
1 ( xy) − 21 y( x + y) − ( xy) 2
1
y(y − x )
z′x ( x, y) = 2 = √ ,
( x + y )2 2 xy ( x + y)2
1 − 21 x ( x 1
2 ( xy) + y) − ( xy) 2 x ( x − y)
z′y ( x, y) = = √ .
( x + y )2 2 xy( x + y)2
Exercise 4.2
a) z′x ( x, y) = y(1 − y2 ) 2 ,
1
z′x (2, 0) = 0,
1 1
z′y ( x, y) = x (1 − y2 ) 2 + xy · 21 (1 − y2 )− 2 (−2y), z′y (2, 0) = 2.
b) Q′L ( L, K ) = 0.1L − 2 K 2 ,
1 1
Q′L (4, 16) = 0.2,
1 1
Q′K ( L, K ) = 0.1L 2 K − 2 , Q′K (4, 16) = 0.05.
Exercise 4.3
a) U1′ ( x1 , x2 ) = 30x14 x24 , U2′ ( x1 , x2 ) = 24x15 x23 .
√ √
√ √
b) U1′ ( x1 , x2 ) = 6( x1 + x2 ) · 2√1x =
1
3( x1 + x2 )
√
x1
,
√ √
√ √
′
U2 ( x1 , x2 ) = 6( x1 + x2 ) · 2√ x = 1 3( x1 + x2 )
2
√
x
. 2
c) Ux′ ( x, y) = y + 10, Uy′ ( x, y) = x + 4.
d) Ux′ ( x, y) = 43 x − 3 y 3 , Uy′ ( x, y) = 83 x 3 y− 3 .
2 2 1 1
Exercise 4.4
a) Since z(x, y) = kxα y1−α , the partial derivatives are
∂z( x, y) α α
= kαx α−1 y1−α = kx α y1−α = z( x, y)
∂x x x
and
∂z( x, y) 1 − α α 1− α 1−α
= k (1 − α ) x α y − α = kx y = z( x, y).
∂y y y
29
30 Solutions
b) Using the results from part (a), we have

∂z( x, y) ∂z( x, y) α 1−α
x· +y· = x · z( x, y) + y · z( x, y)
∂x ∂y x y
= α · z( x, y) + (1 − α) · z( x, y)
= z( x, y).
Exercise 4.5
a)
u ( x, 16) = min{2x, 16},
u (6, 16) = min{12, 16} = 12,
u (10, 16) = min{20, 16} = 16.
b) Since 2x < y at (6, 16), u(x, y) behaves like 2x. Hence, u′x (6, 16) = 2. Similarly, since
y < 2x at (10, 16), u ( x, y) behaves like y. Hence, u ′x (10, 16) = 0.
c) Since 2x < y at (8, 20), u(x, y) behaves like 2x. Hence, u′x (8, 20) = 2.
d) Since y < 2x at (10, 16), u(x, y) behaves like y. Hence, u′y (10, 16) = 1. Similarly, since
2x < y at (8, 20), u ( x, y) behaves like 2x. Hence, u ′y (8, 20) = 0.
Exercise 4.6
a) u ′x ( x, y, z) = x − 3 y 6 z 2 , u ′y ( x, y, z) = 21 x 3 y− 6 z 2 , u ′z ( x, y, z) = 1 12 x 3 y 6 z− 2 .
2 1 1 1 5 1 1 1 1
b) u ′x ( x, y, z) = √ 2 x 2 2 , u ′y ( x, y, z) = √ 2 2 2 , u ′z ( x, y, z) = √ 2 z 2 2 .
x +y +z
y
x +y +z x +y +z
Exercise 4.7
a)
∆z ≈ z′x (4, 1)∆x + z′y (4, 1)∆y = 1
4 · (−0.2) + 1 · 0.01 = −0.04.
b)
∆z ≈ z′x (4, 1)∆x + z′y (4, 1)∆y = 1
4 · 0.04 + 1 · (−0.01) = 0.
Exercise 4.8
a) Since MPPL ( L, K ) = FL′ ( L, K ) = 3L − 5 K 5 ,
the marginal product of√labor at
2 2
( L, K ) =
(200, 400) is MPPL (200, 400) = 3(200)− 25 (400) 25 = 3 · 2 25 = 3 · 4 15 = 3 5 4.
b)
∆F ≈ FL′ (200, 400)∆L + FK′ (200, 400)∆K
√
⇔ 1 ≈ 3 4∆L + FK′ (200, 400) · 0
5
1
⇔ ∆L ≈ √ .
354
c) The marginal product of capital is FK′ ( L, K ) = 2L 35 K − 53 . At ( L, K ) = (200, 400),

Chapter 4 31
. Hence, we have
3 3 3
FK′ (200, 400) = 2(200) 5 (400)− 5 = 2( 21 ) 5 = √
5
2
8
∆F ≈ FL′ (200, 400)∆L + FK′ (200, 400)∆K

√5 2
⇔ 2 ≈ 3 4·0+ √ 5
· ∆K
8
2 √5
⇔ ∆K ≈ 2 = 8.
√
5
8
Exercise 4.9
By Exercise 4.4 we know that z′x (x, y) = αx · z(x, y). Hence, ǫx = αx · z(x, y) · z( x,y
x
)
= α.
Similarly, z′y (x, y) = 1−y α · z(x, y). Hence, ǫy = 1−y α · z(x, y) · z( x,y) = 1 − α.
y
Exercise 4.10
a) Since Q′L ( L, K ) = 1 − 23 32
6L K , the elasticity of output with respect to labor is then
L 2 2 L 1
ǫ L = Q′L ( L, K ) · = 16 L − 3 K 3 · = .
Q( L, K ) 1 13 32 3
2L K
Hence,
1
%∆Q ≈ ǫ L · %∆L = 3 · 1 = 13 .
b) The output increases approximately by
1
%∆Q ≈ ǫ L · %∆L = 3 · 3 = 1.
c)
%∆Q ≈ ǫ L · %∆L ⇔ 2 ≈ 31 %∆L ⇔ %∆L ≈ 6.
Exercise 4.11
x (5, 12, 400) = 457 23 . ǫ p x = x ′ ( p x , py , I ) · x ( p ,px ,I ) = −3 · .
p 5 45
2 = − 1373
x y 457 3
Similarly, ǫ py = 18
1373 , ǫI = 800
1373 .
Exercise 4.12
a) Consider the composite function Z (t) = z(x(t), y(t)), where
√
z( x, y) = x4 y3 , x (t) = t and y(t) = 3t − 4.
To determine the derivative of Z (t), we need z′x (x, y), z′y (x, y), x′ (t) and y′ (t):
1
x ′ (t) = √ , y′ (t) = 3,
2 t
z′x ( x, y) = 4x3 y3 , z′y ( x, y) = 3x4 y2 .
Evaluated at t = 4, we have
x (4) = 2, y(4) = 8,
1
x ′ (4) = , y′ (4) = 3,
4
z′x ( x (4), y(4)) = z′x (2, 8) = 4(23 )(83 ) = 16384,
z′y ( x (4), y(4)) = z′y (2, 8) = 3(24 )(82 ) = 3072.
32 Solutions
According to the chain rule of a composite function, we finally get

Z ′ (4) = z′x ( x (4), y(4)) · x ′ (4) + z′y ( x (4), y(4)) · y′ (4)
1
= 16384 · + 3072 · 3
4
= 13312.
√
b) Z (t) = ( t)4 (3t − 4)3 = t2 (3t − 4)3 .
Z ′ (t) = 2t(3t − 4)3 + t2 · 3(3t − 4)2 · 3

= 2t(3t − 4)3 + 9t2 (3t − 4)2 .
Z ′ (4) = 2 · 4(3 · 4 − 4)3 + 9 · 42 (3 · 4 − 4)2 = 13312.
Exercise 4.13
a) Consider the composite function Z (x) = z(x, y(x)), where
p
and
1 2
y( x ) = 5 − x2 z( x, y) = 3x 3 y 3 .
To determine the derivative of Z (x), we need z′x (x, y), z′y (x, y) and y′ (x):
x
y′ ( x ) = − √ ,
5 − x2
2 2 1 1
z′x ( x, y) = x − 3 y 3 , z′y ( x, y) = 2x 3 y− 3 .
Evaluated at x = 1, we have
1
y(1) = 2, y ′ (1) = − = − 2− 1 ,
2
2 2 2
z′x (1, y(1)) = z′x (1, 2) = 1− 3 2 3 = 2 3 ,
1 1 2
z′y (1, y(1)) = z′y (1, 2) = 2(1 3 )2− 3 = 2 3 .
According to the chain rule of a composite function, we finally obtain

Z ′ (1) = z′x (1, y(1)) + z′y (1, y(1)) · y′ (1)
2 2 2 2 1 2 1 1
= 2 3 + 2 3 · (−2−1 ) = 2 3 (1 − 2−1 ) = 2 3 (1 − ) = 2 3 · = 2− 3 .
2 2
√
b) Z ( x ) = 3x 3 · ( 5 − x2 ) 3 = 3x 3 · (5 − x2 ) 3 = 3(5x − x3 ) 3 .
1 2 1 1 1
2
Z ′ ( x ) = 3 · 13 (5x − x3 )− 3 · (5 − 3x2 ).
Z ′ (1) = (5 · 1 − 13 )− 3 · (5 − 3 · 12 ) = 4− 3 · 2 = 2− 3 .
2 2 1
Exercise 4.14
In ( L, K ) = (4, 6), the level is
F (4, 16) = 20.
Chapter 4 33
Solving the level curve with level 20 for K gives

√
3L + 2 K = 20 ⇔ K ( L ) = (10 − 23 L )2 .
Then differentiate to find the slope at L = 4

K ′ ( L ) = −2 10 − 32 L · 3
2 ⇒ K ′ (4) = −12
Exercise 4.15
a) Since U1′ (x1 , x2 ) = 30x14 x24 and U2′ (x1 , x2 ) = 24x15 x23 (see Exercise 4.3), we obtain
30x14 x24 5x2
slope = − =− .
24x15 x23 4x1
Substituting (x1 , x2 ) = (2, 1), we obtain

5
slope = − .
8
b) Similarly, we have
√ √ −1 1
U1′ ( x1 , x2 ) 6( x1 + x2 ) x1 2 /2 x22
slope = − ′ =− =− 1.
U2 ( x1 , x2 ) √ √ −1
6( x1 + x2 ) x2 2 /2 x12
And, the slope at (4, 9) is

3
slope = − .
2
c) Similarly,
U ′ ( x, y) y + 10
slope = − x′ =−
Uy ( x, y) x+4
The slope at (1, 2) is given by

12
slope = −
5
d) The partial derivatives are Ux′ (x, y) = 43 x− 3 y 3 and Uy′ (x, y) = Hence, the slope
2 2
8 13 − 13
3x y .
s of the tangent line to the level curve in (9, 27) is equal to
U ′ (9, 27) 27
slope = − x′ =− = −1 12 .
Uy (9, 27) 2·9
Exercise 4.16
If two curves touch each other in the point (x0 , y0 ), then we have a common tangent line to
both curves. This means that the slopes of the tangent lines to both curves are the same in
( x0 , y0 ), and ( x0 , y0 ) is positioned on both curves.
First, we can immediately see that (1, 1) satisfies the equation x2 + xy + y2 = 3. So, (1, 1) is
on the curve x2 + xy + y2 = 3 and the level curve of z(x, y) in (1, 1).
34 Solutions
Next, we show that the slopes of the tangent lines to the equation and to the level curve are
the same in (1, 1). By use of the partial derivatives of z(x, y), z′x (x, y) = 2x and z′y (x, y) = 2y,
the slope of the tangent line to the level curve of z(x, y) in (1, 1) equals
z′x (1, 1) 2·1
− =− = −1.
z′y (1, 1) 2·1
To calculate the slope of the tangent line to x2 + xy + y2 = 3, we also use the partial
derivatives. Take g(x, y) = x2 + xy + y2 , then g′x (x, y) = 2x + y and gy′ (x, y) = x + 2y.
Hence, the slope is
g′x (1, 1) 2·1+1
− =− = −1,
gy′ (1, 1) 1+2·1
which is the same as the slope of the tangent line to the level curve of z(x, y) in (1, 1). Using
the above two facts, the proof is completed.
Exercise 4.17
a) In Exercise 4.15 we obtained that the slope of the tangent line of the level curve in (x1 , x2 ) =
(2, 1) is − 85 . Hence, MRS (2, 1) = 85 .
b) In Exercise 4.15 we obtained that the slope of the tangent line of the level curve in (x1 , x2 ) =
(4, 9) is − 23 . Hence, MRS (4, 9) = 23 .
c) In Exercise 4.15 we obtained that the slope of the tangent line of the level curve in (x, y) =
(1, 2) is − 12
5 . Hence, MRS (1, 2) = 5 .
12
d) In Exercise 4.15 we obtained that the slope of the tangent line of the level curve in (x, y) =
(9, 27) is − 23 . Hence, MRS (9, 27) = 23 .
Exercise 4.18
a) i) Since Fx′ (x, y) = p1 and Fy′ (x, y) = p2 , the MRTS can be written as
p1
MRTS ( x, y) = .
p2
ii) The isoquant (level curve) with a production level equals to k is given by
p1 x + p2 y = k ⇒ p2 y = k − p1 x
k p
⇒y= − 1 x,
p2 p2
where the slope is − pp12 . Given p1 and p2 fixed, the isoquants for different production
levels k are presented in Chapter 7.
b) i) We have the production function F (x, y) = min{2x, 5y}. The isoquants are the L-shaped
lines. The isoquants for different production levels k are presented in Chapter 7.
ii) 2 · 7 > 5 · 2, which means that the function behaves as 5K . Hence,
FL (7, 2) 0
MRTS (7, 2) = = =0
FK (7, 2) 5
2 · 5 < 5 · 4, which means that the function behaves as 2L. Hence,

FL (5, 4) 2
MRTS (5, 4) = = =∞
FK (5, 4) 0
Chapter 4 35
Intuitively, since the two factors are perfect complements, the marginal product of the
scarce factor is always infinity, because we can immediately produce more total output,
while the marginal product of the abundant factor is always zero, as any additional unit
of this factor does not increase output.
Exercise 4.19
Since z(x, y) = xexy + ln(x + y2 ), the partial derivative of z(x, y) with respect to x is
1
z′x ( x, y) = e xy + xye xy + .
x + y2
Evaluated at (x, y) = (2, 1), we have

z′x (2, 1) = e2 + 2e2 + 3−1 = 3e2 + 13 .
Exercise 4.20
a) z′y ( x, y) = ln(2x − y2 ) + y · . Hence, z′y (3, 2) = −4 + ln 2.
−2y
2x − y2
b) z′y ( x, y) = x2 + (1+ xyx ) ln 3 . Hence, z′y (1, 0) = 1 + ln1(3) + ln 2.
+ 2xy x ln 2
c) z′y ( x, y) =
2y ( x 2 +2y )−2y2
( x 2 +2y )2
. Hence, z′y (1, 2) = 12
25 .
Exercise 4.21
a) The partial derivatives are
1 2
4(2K 2 + L 3 )3
XK′ ( L, K ) = 1
K 2
and
1 2
8(2K 2 + L 3 )3
X ′L ( L, K ) = 1
3L 3
b) Then the slope s in point (8, 4) is given by

X ′ (8, 4) 2
s = − ′L =− .
XK (8, 4) 3
c) By definition, it holds that MRTS(8, 4) = −s. Hence

2
MRTS (8, 4) = .
3
Exercise 4.22
Consider the composite function Z (t) = z(x(t), y(t)), where x(t) = ln t and y(t) = e2t . To
determine the derivative of Z (t), we need z′x (x, y), z′y (x, y), x′ (t) and y′ (t):
1
x ′ (t) = , y′ (t) = 2e2t ,
t
z′x ( x, y) = 6xy + y, z′y ( x, y) = 3x2 + x.
36 Solutions
Evaluated at t = 4, we have
x (4) = ln 4, y (4) = e 8 ,
1
x ′ (4) = , y′ (4) = 2e8 ,
4
z′x ( x (4), y(4)) = z′x (ln 4, e8 ) = 6e8 ln 4 + e8 = e8 (6 ln 4 + 1),
z′y ( x (4), y(4)) = z′y (ln 4, e8 ) = 3(ln 4)2 + ln 4 = ln 4(3 ln 4 + 1).
According to the chain rule of a composite function, we finally obtain

Z ′ (4) = z′x ( x (4), y(4)) · x ′ (4) + z′y ( x (4), y(4)) · y′ (4)
1
= e8 (6 ln 4 + 1) ·
+ ln 4(3 ln 4 + 1)2e8
4
1 1
= e8 ( + ln(4)(3 + 6 ln(4))).
4 2
Exercise 4.23
√
Consider the composite function Z (x) = z(x, y(x)), where y(x) = 4x + x and z(x, y) =
ln( x2 + y5 ). To determine the derivative of Z ( x ), we need z′x ( x, y), z′y ( x, y) and y′ ( x ):
1 2x 5y4
y′ ( x ) = 4 + √ , z′x ( x, y) = , z′y ( x, y) = .
2 x x 2 + y5 x 2 + y5
Evaluated at x = 1, we have
9
y(1) = 5, y ′ (1) = ,
2
2
z′x (1, y(1)) = z′x (1, 5) = ,
1 + 55
55
z′y (1, y(1)) = z′y (1, 5) = .
1 + 55
According to the chain rule of a composite function, we finally get
Z ′ (1) = z′x (1, y(1)) + z′y (1, y(1)) · y′ (1)
2 55 9
= 5
+ 5
·
1+5 1+5 2
3121
= 4 6252 .
Exercise 4.24
a) Note that z(x, 1) = min{x2 , 2} and z(1, y) = min{1, y + 1}. Hence, z′x (1, 1) = 2 · 1 = 2
and z′y (1, 1) = 0.
b) MRS(1, 1) = zzx′y ((1,1 = 02 = ∞.
′ 1,1)
)
c) This is a vertical line going through (x, y) = (1, 1). Hence, x = 1.
Exercise 4.25
Q′L ( L, K ) = 2LK and hence, Q′L (3, 2) = 12. Further, Q′K ( L, K ) = L2 + 2K and hence,
Q′K (3, 2) = 13. Then ∆Q ≈ Q′K ( L, K ) · ∆K + Q′L ( L, K )∆L gives ∆Q ≈ 13 · 2 + 12 · (−1) = 14.
Chapter 4 37
Exercise 4.26
Since U (x, y) is a Cobb-Douglas function, ǫx = 31 (See Exercise 4.9). %∆x ≈ %∆U
ǫx = 2
1 = 6.
3
Exercise 4.27
a) MRS ( x, y) =
U x′ ( x,y )
Uy′ ( x,y )
2xy3
= 3x2 y2 and hence,
MRS (1, 1) = 23 . Hence, the slope is given by
. Hence,
− 32 y = − 23 x + b and since
1 = − 32 · 1 + b it holds that b = 1 23 and therefore,
y = − 32 x + 1 32 .
b) .
MRS (10, 20) = 1 13 ∆y ≈ − MRS ( x, y) · ∆x ∆x ≈ . Hence, − 1
1 = − 34 .
13
Exercise 4.28
a) Since Y ( L, K ) is a Cobb-Douglas function, ǫ L = 15 (See Exercise 4.9).
b) %∆Y ≈ ǫ L · %∆L = 15 · 2 = 52 .
Exercise 4.29
Z (t) = (2t + 1)2 (4t + 1) and hence, Z ′ (t) = 2 · 2(2t + 1)(4t + 1) + (2t + 1)2 · 4 = 48t2 + 40t +
8. Using the abc-formula on Z ′ (t) = 0 we find the zeros of Z ′ (t): t = − 21 and t = − 31 .
Exercise 4.30
a) z′x ( x, y) = 2y2 · e4−2x · (−2) and hence, z′x (2, 2) = −16. Further, z′y ( x, y) = 4y · e4−2x and
hence, z′y (2, 2) = 8. Then ∆z ≈ z′x (2, 2)∆x + z′y (2, 2)∆y gives −2 ≈ −16 · ∆x + 8 · (−3)
and hence, ∆x ≈ − 16 22
.
b) ǫy = 4y · e4−2x · 2y2 e4−2x and hence, ǫy = 2. Hence, %∆y ≈ %∆z
y
ǫy = 1 2 .
1
Exercise 4.31
a) U (2, 1) = 0and hence, 0 = xy + x − 4 ⇔ xy = 4 − x ⇔ y = 4−x x . Therefore, y(x) = 4−x x .
b) MRS ( x, y) = Ux′ ( x,y) = x . Then slope = − MRS (1, 2) = −3. Therefore, y = −3x + b.
U ′ ( x,y )
y
y +1
Since, 2 = −3 · 1 + b we obtain b = 5, which gives y = −3x + 5.

Exercise 4.32
∆z ≈ z′x (1, 1)∆x gives −2 ≈ z′x ( x, y) · 3. Therefore, z′x (1, 1) = − 32 .
Since ǫx = z′x (x, y) · z( x,y
x
)
= − 32 · 15 we obtain ǫx = − 15
2
.
Exercise 4.33
a) MPPL ( L, K ) = Q′L ( L, K ) = 4L − 5 K 5 , MPPK ( L, K ) = Q′K ( L, K ) = 6L 5 K − 5 .
3 3 2 2
MPPL ( L, K ) 2K
b) MRTS ( L, K ) =
MPPK ( L, K )
=
3L
.
Exercise 4.34
√ √ 41 1
2
Z ( x ) = 10e( x + x)2 · x = 10e x 2 + x 1 2 +2x 3 .
1 1
Hence + 1 12 x 2 + 6x2 ).
4 1 3 1 1
Z′ (x)
= 10e x 2 + x 2 +2x · (4 12 x3 2
Hence, Z ′ (1) = 120e4 .
Exercise 4.35
3y = 16 − x gives y = 163 − 31 x. Hence, MRS(x, y) = −slope gives x+y2y = 13 , which results
in y = x. Therefore, y = 163 − 31 y, which gives y = 4. Consequently, x = 4. Hence, a = 4 and
b = 4.
38 Solutions
Exercise 4.36 √
ax + by = 18gives y = 18b − ba x. Hence, MRS(x, y) = −slope gives x· √y1 = 12 = ba . Hence,
2 y
2a = b. Therefore, 1 = 18b − 2 · 4, which gives b = 6 and therefore a = 3. Hence, a = 3,

1
b = 6.
Exercise 4.37
Since the level curve is tangent to the x-axis, b = 0. Moreover, MRS(x, y) = −slope gives
6x +4y = 0, which gives (since y = 0) 2x + 3 = 0. Hence, a = −1 2 , b = 0.
2x +6y +3 1
Exercise 4.38
First, we compute the partial derivatives. These are symmetrical (since the original function
is symmetrical) and given by
1 1 1 1
( x 3 + y 3 )2 ( x 3 + y 3 )2
Ux′ ( x, y) = 2 and Uy′ ( x, y) = 2
x 3 y 3
Then we know that the slope s of the tangent line is

1 1
( x 3 +y 3 )2
2 y2
x3 3
s=− 1 1
=−
(x 3 +y 3 )2 x
2
y3
Since we are trying to find the point such that the slope is equal to −4, we need
y 2
3
=4
x
which we can rearrange to give
y = 8x
Furthermore, we are asked to find the point such that U ( x, y) = 54. Since y = 8x, we
therefore need
1
1 3 1
U ( x, 8x ) = x 3 + (8x ) 3 = (3x 3 )3 = 54.
Hence, we need to have x = 2, which implies y = 16. Our solution is therefore (2, 16).
Exercise 4.39
First, compute the MRS as
6x2 y4 3y
MRS ( x, y) = 3 3
=
8x y 4 x
which we need to be equal to 3. Hence, we must have

y = 4x
Now that we know the ratio, go about finding x such that U (x, 4x) = 512:
U ( x, 4x ) = 2x3 44 x4 = 512x7 = 512 ⇒ x ∗ = 1, y∗ = 4
Chapter 4 39
Exercise 4.40
Ux′ ( x, y) = aye ax and Uy′ (x, y) = eax . Hence, the slope is given by
U ′ (1, 3)
s = − x′ = −3 · a ⇒ 3a = 3
Uy (1, 3)
Hence, a = 1. Then the utility level is U (1, 3) = 3e.

5
Exercise 5.1
a) Since y(x) = 2x3 − 9x2 − 12x, the first order derivative is
y′ ( x ) = 6x2 − 18x − 12 = 6( x2 − 3x − 2).
The zeros of y′ (x) are given by

√ √
3− 17 3+ 17
x=
2
and x = 2
.
From the sign survey of y′ (x), we have the following.

√
3−
17
If x ∈ (−∞, 2
], y′ ( x ) ≥ 0.
√ √
3 − 17 3 + 17
If x∈[ , ], y′ ( x ) ≤ 0.
2 2
√
3 + 17
If x∈[
2
, ∞ ), y′ ( x ) ≥ 0.
√ √
So, the function
√
is√increasing on (−∞, 3−2 17 ] and on [ 3+2 17 , ∞). The function is decreas-
ing on [ 3−2 17 , 3+2 17 ].
b) Consider the function y(x) = x2 − 4 ln x. Notice that the domain is x > 0. The first order
derivative is
4
y′ ( x ) = 2x − .
x
The zero of y′ (x) is the solution of
4
y′ ( x ) = 0 ⇔ 2x − =0
x
⇔ 2x2 − 4 = 0
√
⇔ x = 2.
Using the sign survey of y′ (x), we have the following.
√
If x ∈ (0, 2], y′ ( x ) ≤ 0.
√
If x ∈ [ 2, ∞), y′ ( x ) ≥ 0.
√ √
So, the function is increasing on [ 2, ∞ ) and is decreasing on (0, 2] .
41
42 Solutions
c) Consider the function y(x) = 1 3

2 (x − x 2 + x − 2). The first order derivative is
1
y′ ( x ) = (3x2 − 2x + 1).
2
Since the discriminant D = 1 − 3 = −2 < 0, y′ (x) has no zeros. Hence, we either

have y′ (x) being positive or negative on the whole domain, but not both. By plugging an
arbitrary x into y′ (x), we conclude y′ (x) > 0 for all x. Hence, the function is increasing
on (−∞, ∞).
d) Since y(x) = xex , the first order derivative is
y′ ( x ) = e x + xe x = (1 + x )e x .
The zero of y′ (x) is the solution of

y ′ ( x ) = 0 ⇔ (1 + x ) e x = 0
⇔ 1+x = 0
⇔ x = −1.

If x ∈ (−∞, −1], y′ ( x ) ≤ 0.
If x ∈ [−1, ∞), y′ ( x ) ≥ 0.
So, the function is decreasing on (−∞, −1] and increasing on [−1, ∞).
Exercise 5.2
Since y(x) = (x − 1)(x + a), the first order derivative is
y′ ( x ) = ( x − 1) + ( x + a) = 2x + a − 1.
In order to have the change of sign of y′ (x) at x = 2, we require

y′ (2) = 0 ⇔ a = −3.
Finally, for a = −3, we check that indeed the following holds:

y′ ( x ) ≤ 0, if x ∈ (− ∞, 2].
y′ ( x ) ≥ 0, if x ∈ [2, ∞ ).
Hence, a = −3.
Exercise 5.3
Any function y(x)√with a boundary optimum in x = b and y′ (b) 6= 0 fulfills this criterion. For
example, y(x) = x. The domain is x ≥ 0. It has a boundary minimum of 0 in x = 0, but
y ′ (0) = √1 6 = 0.
2 0
Exercise 5.4
a) Consider the function y(x) = xe−x2 . The first order derivative is
2 2 2
y′ ( x ) = e− x − xe− x (2x ) = e− x (1 − 2x2 ).
Chapter 5 43
The stationary points of y(x) are given by

2
y′ ( x ) = 0 ⇔ |{z}
e− x (1 − 2x2 ) = 0
>0
⇔ 1 − 2x2 = 0
1
⇔ x = ±√ .
2
If x ∈ (−∞, − √1 ], y′ ( x ) ≤ 0.
2
If x ∈ [− √1 1
, √ ], y′ ( x ) ≥ 0.
2 2
If x ∈ [ √1 , ∞ ), y′ ( x ) ≤ 0.
2
q q
According to the monotony criterion, y(− √12 ) = − 2e1 is a minimum and y( √12 ) = 1
2e
is a maximum.
b) Consider the function y(x) = x2 − 2x + 2. The first order derivative is
y′ ( x ) = 2x − 2.
The stationary point of y( x ) is in x = 1. Using the sign survey of y ′ ( x ), we have the

following:
If x ∈ [0, 1], y′ ( x ) ≤ 0.
If x ∈ [1, 5], y′ ( x ) ≥ 0.
According to the monotony criterion, y(1) = 1 is a minimum. Additionally, by use of the

sign survey of y′ (x), we also know that y(0) = 2 and y(5) = 17 are boundary maxima.
Exercise 5.5
a) Consider the function y(x) = 1 3
3x − x2 + x + 10. The first order derivative is
y′ ( x ) = x2 − 2x + 1 = ( x − 1)2
Hence, the stationary point is in x = 1.

b) Using the sign survey of y′ (x), we have the following.
If x ∈ [0, 1], y′ ( x ) ≥ 0.
If x ∈ [1, ∞), y′ ( x ) ≥ 0.
Since the function is increasing both on [0, 1] and on [1, ∞), y(x) has no optimum in x = 1.
(There is only a boundary minimum y(0) = 10 in x = 0.)
Exercise 5.6
a) Consider the function y(x) = x2 + 2x + 2. The first order derivative is
y′ ( x ) = 2x + 2.
44 Solutions
Hence, there is a stationary point in x = −1. Since there is only one stationary point, we
can use the alternative criterion. y(−1) = 1, y(−2) = 2 and y(2) = 10. Hence, y(−1) = 1
is a minimum. Additionally, we also know that y(−2) = 2 and y(2) = 10 are boundary
maxima.
b) Notice that the domain has no boundary points. Consider the function y(x) = − x + ln(x +
1). The first order derivative is
1
y′ ( x ) = −1 + .
x+1
The stationary point of y(x) is in x = 0. Since there is only one stationary point, we can
use the alternative criterion. y(0) = 0, y(1) = −1 + ln 2, y(− 12 ) = 21 + ln 12 . Hence,
y(0) = 0 is a maximum.
Exercise 5.7
a) y( x ) = e x , y′ ( x ) = e x , y′′ ( x ) = e x .
b) y( x ) = x ln x, ′
y ( x ) = ln x + 1, y′′ ( x ) = 1x .
Exercise 5.8
a) The first and second order derivatives of y(x) are
y′ ( x ) = 3x2 − 12x and y′′ ( x ) = 6x − 12.
The stationary points are solutions of
y′ ( x ) = 0 ⇔ 3x2 − 12x = 0
⇔ 3x ( x − 4) = 0
or x = 4.
⇔x=0
Since = −12 < 0 and y′′ (4) = 12 > 0, according to the second order criterion, y( x )
y′′ (0)
has a maximum y(0) = 10 and a minimum y(4) = −22.
b) The first and second order derivatives of y(x) are
y′ ( x ) = 480x9 + 56x7 − 30x5 − 16x3 + 6x2 − 4x,
y′′ ( x ) = 4320x8 + 392x6 − 150x4 − 48x2 + 12x − 4.
Since y′ (0) = 0 and y′′ (0) = −4 < 0, according to the second order criterion, y(0) = 0 is
a maximum of y(x).
Exercise 5.9
Since the producer is a price taker (the per unit price is not affected by the quantity produced
y), the revenue is
R(y) = 5y.
Given the cost function C (y), the profit equals
π (y) = 5y − 3y3 + 2y2 .
According to the first order criterion the most profitable quantity produced is a stationary
point of π (y),
π ′ (y) = 5 − 9y2 + 4y = 0 ⇔ − 9y2 + 4y + 5 = 0
5
⇔ y = 1 or y = − .
9
Chapter 5 45
As − 59 < 0, the only candidate is y = 1. Finally, we need to check whether y = 1 is indeed the
maximum location and whether the profit is positive in y = 1. According to the sign survey
of π ′ (y) and the monotony criterion, we conclude that π (1) = 4, which is positive, is the
maximum profit.
Exercise 5.10
Given the demand function y( p) = 25 − 12 p, we can express the revenue, costs, and profit
functions in term of p. The revenue is given by
1 2
R( p) = p · y( p) = 25p − p ,
2
the costs are
1
C ( p) = 20 + 5y( p) + (y( p))2
2
1 2
= p − 15p + 457 12 ,
8
and the profit equals
5
π ( p) = R( p) − C ( p) = − p2 + 40p − 457 12 .
8
The first order derivative of π ( p) is

π ′ ( p) = − 54 p + 40.
Setting it equal to zero gives the stationary point p = 32. According to the sign survey
of π ′ ( p) and the monotony criterion, we conclude that π (32) = 182 12 , which is positive, is
the maximum profit. Thereby, the optimum prices is 32 and the optimal production level is
y(32) = 25 − 32 2 = 9.
Exercise 5.11
a) Since the producer is a price taker, the revenue is R(y) = py. Given the cost function
√
C (y) = y y = y 2 , the profit equals π (y) = py − y 2 . The first order derivative is then
3 3
π ′ (y) = p − 23 y 2 . Setting it equal to zero gives y = 94 p2 . From the sign survey of π ′ (y),
1
the profit is maximal when y = 94 p2 .

Next we determine the minimum of the average costs AC (y) = y 12 . Its derivative is
AC ′ (y) = 21 y− 2 . Using the first order criterion, we find there is no stationary point. Using
1
the sign survey of AC ′ (y), the average costs has minimum AC (0) = 0. Hence the supply
curve is defined by y( p) = 94 p2 , p ≥ 0.
b) Since the producer is a price taker, the revenue is R(y) = py. Given the cost function
C (y) = 5y3 − 40y2 + 96y, the profit equals π (y) = py − 5y3 + 40y2 − 96y. The first
order derivative
p is then π (y) = p − 15y + 80y − 96′. Setting it equal to zero gives
′ 2
y = 38 ± 30 1
640 + 60p. From the sign survey of π (y), the profit is maximal when
640 + 60p.
p
y = 38 + 30
1
Next we determine the minimum of the average costs AC (y) = 5y2 − 40y + 96. Its
derivative is AC ′ (y) = 10y − 40. The first order criterion gives the stationary point.
AC ′ (y) = 0 ⇔ y = 4.
46 Solutions
Using the sign survey of AC ′ (y), the average costs has minimum AC (4) = 16. Hence the
supply curve is defined by
(
0 if p < 16
y( p) =
if p ≥ 16.
p
2 23 + 1
30 640 + 60p
Exercise
q 5.12
2·5·400
q= 0.1 = 200
Exercise 5.13
a) Because z′x (x, y) = 14 − 2x + y and z′y ( x, y) = 2 − 2y + x, the stationary points are
solutions of
( (
z′x ( x, y) = 0 14 − 2x + y = 0
⇔
z′y ( x, y) = 0 2 − 2y + x = 0
(
14 − 2x + y = 0
⇔
x = 2y − 2
(
14 − 2(2y − 2) + y = 0
⇔
x = 2y − 2
(
y=6
⇔
x = 2y − 2
(
y=6
⇔
x = 10.
Hence, (x, y) = (10, 6) is the only stationary point.

b) Because z′x (x, y) = 3x2 − 3 and z′y (x, y) = 3y2 − 12, the stationary points are solutions of
( (
z′x ( x, y) = 0 3x2 − 3 = 0
⇔
z′y ( x, y) = 0 3y2 − 12 = 0
(
⇔
x=1 or x = −1
y=2 or x = −2.
Since the partial derivatives are both independent of the other variable, all combinations
of the above x’s and y’s are stationary points, i.e., (1, 2), (1, −2), (−1, 2) and (−1, −2).
c) Because z′x (x, y) = y2 + 3x2 y − y and z′y (x, y) = 2xy + x3 − x, the stationary points are
solutions of
( (
z′x ( x, y) = 0 y2 + 3x2 y − y = 0
⇔
z′y ( x, y) = 0 2xy + x3 − x = 0
(
y(y + 3x2 − 1) = 0
⇔
x (2y + x2 − 1) = 0
(
y=0 or y + 3x2 − 1 = 0
⇔
x=0 or 2y + x2 − 1 = 0.
Chapter 5 47
When y = 0, we have
( (
y=0 y=0
⇔
x=0 or 2(0) + x2 − 1 = 0. x=0 or x = −1 or x = 1.
When x = 0, we have
( (
y=0 or y + 3(0)2 − 1 = 0 y = 0 or y = 1
⇔
x=0 x = 0.
When x 6= 0 and y 6= 0, we have

( (
y + 3x2 − 1 = 0 y = 1 − 3x2
⇔
2y + x2 − 1 = 0 2y + x2 − 1 = 0
(
y = 1 − 3x2
⇔
2(1 − 3x2 ) + x2 − 1 = 0
(
y = 1 − 3x2
⇔
5x2 = 1
(
y = 1 − 3x2
⇔
x = − √1 or x = √1
5 5
(
2
y= 5
⇔
x = − √1
5
or x = √1 .
5
Therefore, the stationary points are (0, 0), (−1, 0), (1, 0), (0, 1), (− √15 , 52 ) and ( √15 , 52 ).
Exercise 5.14
a)
z( x, y) = 2xy − 5x2 + y − 1
z′x ( x, y) = 2y − 10x
z′y ( x, y) = 2x + 1
z′′xx ( x, y) = −10
z′′xy ( x, y) = 2
z′′yx ( x, y) = 2
z′′yy ( x, y) = 0.
b) z( x, y) = x − 5y + 3
z′x ( x, y) = 1
z′y ( x, y) = −5
z′′xx ( x, y) = 0
z′′xy ( x, y) = 0
z′′yx ( x, y) = 0
z′′yy ( x, y) = 0.
48 Solutions
c)
√
q ( L, K ) = 0.2 LK
1 1 1
q ′L ( L, K ) = 0.2( LK )− 2 K/2 = 0.1L − 2 K 2
1 1 1
q ′K ( L, K ) = 0.2( LK )− 2 L/2 = 0.1L 2 K − 2
√
′′ − 32 21 K
q LL ( L, K ) = −0.05L K = −0.05 √
L L
′′ − 12 − 21 1
q LK ( L, K ) = 0.05L K = 0.05 √
KL
′′ − 12 − 21 1
q KL ( L, K ) = 0.05L K = 0.05 √
KL
√
1 3 L
q ′′KK ( L, K ) = −0.05L 2 K − 2 = −0.05 √ .
K K
Exercise 5.15
a) The first order partial derivatives are
z′x ( x, y) = 10x + 4y − 6 and z′y ( x, y) = 4x + 2y − 2.
Since z′x (1, −1) = z′y (1, −1) = 0, (x, y) = (1, −1) is a stationary point of z(x, y).
b) The second order partial derivatives are
z′′xx ( x, y) = 10, z′′xy ( x, y) = 4 and z′′yy ( x, y) = 2,
and hence the criterion function is given by

C ( x, y) = 10(2) − 42 = 4.
Since C (1, −1) = 4 > 0 and z′′xx (1, −1) = 10 > 0, according to the second order criterion,
(1, −1) is a minimum location of z( x, y).
Exercise 5.16
a) The second order partial derivatives are
z′′xx ( x, y) = −2, z′′xy ( x, y) = 1 and z′′yy ( x, y) = −2,

C ( x, y) = (−2)(−2) − 12 = 3.
From Exercise 5.13, the stationary point of z(x, y) is (x, y) = (10, 6). Since C (10, 6) =
3>0and z′′xx (10, 6) = −2 < 0, z(10, 6) = 76 is a maximum of z(x, y).
z′′xx ( x, y) = 6x, z′′xy ( x, y) = 0 and z′′yy ( x, y) = 6y,

C ( x, y) = (6x )(6y) − 02 = 36xy.
Chapter 5 49
From Exercise 5.13, the stationary points of z(x, y) are (1, 2), (1, −2), (−1, 2) and (−1, −2).
Since
C (1, 2) = 72 > 0, z′′xx (1, 2) = 6 > 0,
C (1, −2) = −72 < 0,
C (−1, 2) = −72 < 0,
C (−1, −2) = 72 > 0, z′′xx (−1, −2) = −6 < 0,
according to the second order criterion, z(x, y) has a minimum z(1, 2) = 2 and a maximum
z(−1, −2) = 38. The points (1, −2) and (−1, 2) are saddle points.
c) The second order partial derivatives are
z′′xx ( x, y) = 6xy, z′′xy ( x, y) = 2y + 3x2 − 1 and z′′yy ( x, y) = 2x,
C ( x, y) = 12x2 y − (2y + 3x2 − 1)2 .
From Exercise 5.13, the stationary points of z( x, y) are (0, 0), (−1, 0), (1, 0), (0, 1),
(− √1 , 25 ) and ( √1 , 25 ). Since
5 5
C (0, 0) = −1 < 0,
C (0, 1) = −1 < 0,
C (−1, 0) = −4 < 0,
C (1, 0) = −4 < 0,
q
C (− √1 , 25 ) = 4
5 > 0, z′′xx (− √1 , 25 ) = −2 52 15 < 0,
5 5
q
′′ √1 2
C ( √1 , 25 ) = 4
5 > 0, z xx ( , 5 ) = 2 52 15 > 0,
5 5
q
according to the second order criterion, z(x, y) has a minimum z( √15 , 25 ) = − 254 1
5 and a
q
maximum z(− √15 , 25 ) = 254 15 . The other stationary points are saddle points.
Exercise 5.17
π ( L, K ) = 12K 3 L 2 − L − 23 K .
1 1
π ′L ( L, K ) = 6K 3 L − 2 − 1 and π K′ ( L, K ) = 4K − 3 L 2 − 23 . π ′L ( L, K ) = 0 gives L = 36K 3 .

1 1 2 1 2
Plugging this into πK′ ( L, K ) = 0 gives K = 46656. Then L = 46656 and π (46656, 46656) =
15552. To check whether this is a maximum we determine the second order partial derivatives.
π ′′LL ( L, K ) = −3L −1 2 K 3 , π KK
′′ ( L, K ) = −2 2 L 21 K −1 23 and π ′′ ( L, K ) = 2L − 21 K − 13 . Therefore,
1 1
3 LK
C ( L, K ) = 8L −1 K −1 3 − 4L −1 K −1 3 = 4L −1 K −1 3 > 0. Since, π ′′LL ( L, K ) < 0, the maximum
1 1 1
profit is 15552.
Exercise 5.18
z( a, b ) = (2 − ( a · 1 + b ))2 + (2 − ( a · 3 + b ))2 + (5 − ( a · 4 + b ))2 + (7 − ( a · 2 + b ))2 .
z′a ( a, b ) = −2(2 − a − b ) − 6(2 − 3a − b ) − 8(5 − 4a − b ) − 4(7 − 2a − b ) = −84 + 60a + 20b = 0.
z′b ( a, b ) = −2(2 − a − b ) − 2(2 − 3a − b) − 2(5 − 4a − b) − 2(7 − 2a − b ) = −32 + 20a + 8b = 0
gives a = 32 20 − 20 b. Plugging this into z a ( a, b ) = 0 gives a = 5 , which results in b = 3.
8 ′ 2
Note that zaa (a, b) = 60, zbb (a, b) = 8 and zab (a, b) = 20 results in C (a, b) = 80. Hence,
′′ ′′ ′′
C ( 52 , 3) = 80 > 0 and z′′aa ( 52 , 3) = 60 > 0, which implies that ( a, b ) = ( 25 , 3) is a minimum

location. Consequently, y = 25 x + 3.
50 Solutions
Exercise 5.19
a) See Chapter 7 for the line of constraint.
b) See Chapter 7 for level curves with different z-values.
c) Using the figure in Chapter 7 we obtain that (x, y) = (5, 5) is the minimum location with
z(5, 5) = 50.
Exercise 5.20
a) First, we solve the restriction for y,
y = 10 − x,
where x ∈ [0, 10] in order to have x ≥ 0 and y ≥ 0. Then, substituting the restriction into
the original optimization problem z(x, y) gives a optimization problem with one variable
only, which is
optimize Z (x) = z(x, 10 − x) = 2x2 − 20x + 100,
where x ∈ [0, 10].
The first order derivative is
Z ′ ( x ) = 4x − 20.
Hence, there is a stationary point in x = 5. According to the monotony criterion, it follows

from the sign survey of Z ′ (x) that the function has a minimum on [0, 10] at x = 5. The
corresponding y-value is y = 10 − 5 = 5. And the minimum is z(5, 5) = 50.
Additionally, by use of the sign survey of Z ′ (x), we also know that z(0, 10) = 100 and
z(10, 0) = 100 are boundary maxima.
b) As above, write y = 1 − x and substitute into the optimization problem to give
Z ( x, 1 − x ) = − x2 + 2x (1 − x ) + 2(1 − x )2 = − x2 − 2x + 2
⇒ Z ′ ( x ) = −2x − 2
⇔ x ∗ = −1
Hence, there is a maximum z(−1, 2) = 3.

c) Using the constraint, write y = 12 − x, where x ∈ [0, 12]. Then write the maximization
problem as
Z ( x ) = 34 x3 − 24x2 + 144x
and take the derivative as

Z ′ ( x ) = 4x2 − 48x + 144 = 4( x2 − 12x + 36) = 4( x − 6)2
Hence, x = 6 is a stationary point. However, using the sign survey shows that this is not a
minimum or a maximum location. Hence, we end up with a boundary minimum z(0, 12) = 0
and a boundary maximum z(12, 0) = 576.
Exercise 5.21
a) Since z′x (x, y) = 4, z′y (x, y) = 2, g′x (x, y) = 2 x − 31 y 31
3 and gy′ (x, y) = 1 23 − 23
3x y , we have
z′x ( x, y) g′x ( x, y) 2y
z′y ( x, y)
=2 and ′
gy ( x, y)
=
x
.
Chapter 5 51
 ′ (
 z x ( x,y) = g′x ( x,y) 2=
2y
z ′y ( x,y ) gy′ ( x,y ) ⇔ x
2 1
 g( x, y) = k x y = 10
3 3
(
y=x
⇔ 2 1
x 3 y 3 = 10
(
y=x
⇔
x = 10
(
y = 10
⇔
x = 10.
After determining the possible candidate from the first order criterion, we need to check
whether this candidate is a maximum, minimum or neither. Taking points to the left and
the right of x = 10 gives the following: z(1, 1000) = 2004 and z(10 32 , 1) = 4 · 10 32 + 2,
which are both greater than z(10, 10) = 60. Hence, we must have x = y = 10 in the
optimum: z(10, 10) = 60 is a minimum.
b) Again using the first-order criterion, we have that
z′x ( x, y) 2y g′ ( x, y) 2x
′ = = x′ = ⇔ x 2 = y2
zy ( x, y) 2x gy ( x, y) 2y
Substituting this into the constraint gives

√
2x2 = 4 ⇔ x = 2
√ √ √
such
√ that
√ x = y = 2. Since z( 2, 2) = 4 and z(2, 0) = 0 and z(0, 2) = 0, we have that
z( 2, 2) = 4 is a maximum and both z(2, 0) = 0 and z(0, 2) = 0 are boundary minima.
Exercise 5.22
The first order criterion implies
y a
= ⇔ by = ax.
x b
Plugging this into the constraint gives
2ax = 6.
Since we are looking for a and b such that the solution is in point (9, 1), we plug these values
into the above equation. This implies
18a = 6 ⇔ a = 13 .
Then it follows that

1
3 ·9
b= = 3.
1
Then plugging in these values for a and b gives us the boundary values z(0, 2) = 0 and
z(18, 0) = 0. Hence, we know that the maximum is indeed in (9, 1) when choosing the
appropriate values for a and b.
52 Solutions
Exercise 5.23
a) L ( x, y, λ) = 5x2 + 6y2 − xy − λ( x + 2y − 24).
L ′x ( x, y, λ) = 10x − y − λ = 0 gives λ = 10x − y. We plug this into L′y (x, y, λ) =
12y − x − 2λ = 0, which gives y = . We plug this into L′λ (x, y, λ) = − x − 2y + 24 = 0,
1 21 x
which gives x = 6. Therefore, y = 9 and λ = 51. Hence, the stationary point of the
Lagrange-function is (x, y, λ) = (6, 9, 51).
b) L ( x, y, λ) = xy − λ( x2 − 2x + y2 ).
L ′y ( x, y, λ) = x − 2yλ = 0 gives λ = . Plugging this into L′x (x, y, λ) = y − 2xλ + 2λ = 0
x
2y
gives y2 − x2 + x = 0. Putting this equal to L′λ (x, y, λ) = − x2 + 2x − y2 results in
x (2x − 3) = 0. Therefore, x = 0 or x = 1 12 . If x = 0, then y = 0 and λ = 0. If
q q q q
x = 1 12 , then y = 4 or y = −
3 3 , which gives λ =
4
3 or λ = −
4
3 , respectively.
4
Hence, the stationary
q q points of the Lagrange function
q q are given by ( x, y, λ) = (0, 0, 0),
( x, y, λ) = (1 21 , 34 , 34 ) and ( x, y, λ) = (1 12 , − 34 , − 34 ).
c) L(x, y, λ) = xxy + y − λ(4x + y − 8).
L x ( x, y, λ) = ( x +y)2 − 4λ = 0 and L ′y ( x, y, λ) = ( x + − λ = 0. Combining this gives
′ y2 x2
y)2
y = 4x . Therefore, y = 2x or y = −2x. Plugging y = 2x into L ′λ ( x, y, λ) = −4x −
2 2
y + 8 = 0 gives x = 1 13 in which case y = 2 32 and λ = 19 . Plugging y = −2x into

L ′λ ( x, y, λ) = 4x + y − 8 = 0 gives x = 4 in which case y = −8 and λ = 1. Hence,
the stationary points of the Lagrange function are given by (x, y, λ) = (1 13 , 2 23 , 19 ) and
( x, y, λ) = (4, −8, 1).
Exercise 5.24
Solving the first order criterion of the constrained optimization problem gives
 ′ (
 Ux ( x,y) = p x y2
= 4
Uy′ ( x,y ) py
⇔ 2xy 2
 p x x + py y = I 4x + 2y = 48
(
y = 4x
⇔
2x + y = 24
(
y = 4x
⇔
6x = 24
(
y = 4x
⇔
x = 4.
(
y = 16
⇔
x = 4.
Hence the point (x, y) = (4, 16) is a candidate for the maximum location. The other candidates
are from the boundary: (0, 24) and (12, 0). Since U (4, 16) = 1024 > U (0, 24) = U (12, 0) = 0,
the function U (x, y) has a maximum U (4, 16) = 1024.
Chapter 5 53
Exercise 5.25
Solving the first order criterion of the constrained optimization problem gives
( U ′ (r,b) pr
(
2r
r
Ub′ (r,b )
= pb 4b = 10
20
⇔
pr r + p b b = I 10r + 20b = 90
(
r=b
⇔
r + 2b = 9
(
r=b
⇔
3b = 9
(
r=3
⇔
b = 3.
Hence the point (3, 3) is a candidate for the maximum location. The other candidates are
from the boundary: (0, 4 12 ) and (9, 0). Since U (9, 0) = 81 > U (0, 4 12 ) = 40 12 > U (3, 3) = 27,
the function U (x, y) has a maximum U (9, 0) = 81.
Exercise 5.26
The optimization problem in this exercise is
minimize C ( L, K ) = 3L + 12K
subject to X( L, K ) = 10,
where L, K > 0.
Solving the first order criterion of the constrained optimization problem together with the
equality constraint gives
( X ′ ( L,K )  1 1
L
= w  L− 2 K 2 /2 = 3
XK′ ( L,K ) r 1 1
⇔ L 21 K −12 /2 12
X ( L, K ) = 10  2 2
L K = 10
(
K
= 1
⇔ L 1 14
L 2 K 2 = 10
(
L = 4K
⇔
2K = 10
(
L = 20
⇔
K = 5.
Hence the point (20, 5) is a candidate for the minimum of the optimization problem, with
C (20, 5) = 120. To show (20, 5) is indeed a minimum location, we take values on either side
of L = 20. For example, C (10, 10) = 150 and C (100, 1) = 300. Hence, (20, 5) is a minimum
location and the producer has to pay at least 120 to produce 10 units.
Exercise 5.27
a) Solving the first order criterion of the constrained optimization problem together with the
54 Solutions

( P ′ ( L,K )  1
L
= w  L− 2 /2 = 2
PK′ ( L,K ) r
⇔ K −1 2 /2 1 1
1
P ( L, K ) = y  2
L + K2 = y
( 1 1
K 2 = 2L 2
⇔ 1 1
L2 + K2 = y
( 1 1
K 2 = 2L 2
⇔ 1
3L 2 = y
( 1 1
K 2 = 2L 2
⇔
L = 19 y2
(
K = 49 y2
⇔
L = 91 y2 .
If the costs are minimal at ( L, K ) = ( 91 y2 , 49 y2 ), then the cost function C (y) is given by
C (y) = C ( 19 y2 , 49 y2 ) = 32 y2 .
We check whether this is the minimum cost function by taking values both to the left and
the right of L = 91 y2 : C (y2 , 0) = 2y2 and C (0, y2 ) = y2 . Hence, ( L, K ) = ( 91 y2 , 49 y2 ) is the
minimum location and C (y) = 32 y2 is the cost function.
b) The profit equals π (y) = py − C (y) = py − 23 y2 . The first order derivative is then
π ′ (y) = p − 34 y. Setting it equal to zero gives y = 34 p. From the sign survey of π ′ (y), the
profit is maximal when y = 43 p.
The average costs are AC (y) = C (yy) = 3 yy = 23 y. From AC ′ (y) = 23 > 0, we have
2 2
AC ′ (y) > 0 for all y ≥ 0. Hence, the minimum of the average costs is at the boundary
point y = 0 with value AC (0) = 0. Hence the supply curve is given by y( p) = 34 p, ( p ≥ 0).
Exercise 5.28
U (µ, σ) = µ − 5σ2 = 0.08w1 + 0, 1w2 − 5 · 0.052 · w22 = 0.08 + 0.02w2 − 0.0125w22 = u (w2 ).
u2′ (w2 ) = 0.02 − 0.025w2 = 0 gives w2 = 0.8 and w1 = 1 − 0.8 = 0.2.
Since u′′ (w2 ) = −0.25 < 0 this is a maximum location.
Exercise 5.29
2 = u ( w ).
U (µ, σ) = µ − 12 ασ2 = µ S + w2 (µ A − µ S ) − 12 α · w22 σA 2
µ A − µS
u2′ (w2 ) = µ A − µ S − αw2 σA
2 =0 (and u2′′ (w2 ) = −ασA2 < 0) gives w2 = 2
> 0.
ασA
Exercise 5.30
U (µ, σ) = µ − 10σ2
q
9 2 4 2 1 2
= 0.04w1 + 0.06w2 + 0.08w3 − 10( 2500 w2 + 625 w3 − 500 w2 w3 )
9 2 40 2 1
= 0.04 + 0.02w2 + 0.04w3 − 250 w2 − 625 w3 + 50 w2 w3
= u ( w 2 , w 3 ).
Chapter 5 55
u2′ (w2 , w3 ) = 0.02 − 0.072w2 + 0.02w3 = 0 gives w3 = 3.6w2 − 1. We plug this into u3′ (w2 , w3 ) =
0.04 − 0.128w3 + 0.02w2 = 0 to obtain w2 = 551 210
, which gives w3 = 551
205
and w1 = 1 − w2 −
w3 = 551 .
136
We still have to check whether this is a maximum location: u22

′′ (w , w ) = −0.072, u ′′ (w , w ) =
2 3 33 2 3
−0.128 and u23 = 0.02 gives C (w2 , w3 ) = (−0.072)(−0.128) − 0.022 = 0.008816 > 0. Since
′′
′′ (w , w ) < 0 we find that w = 136 , w = 210 , w = 205 indeed gives a maximum.
u22 2 3 1 551 2 551 3 551
Exercise 5.31
a) y′ ( x ) = e− x , y′′ ( x ) = − e− x < 0 for all x. Hence, y( x ) is concave.
b) y′ ( x ) = 6x5 + 4x3 , y′′ ( x ) = 30x4 + 12x2 ≥ 0 for all x. Hence, y( x ) is convex.
c) y′ ( x ) = −2x + 4, y′′ ( x ) = −2 < 0 for all x. Hence, y( x ) is concave.
1 1
d) y′ ( x ) = , y′′ (x) = −√41 x−1 2 < 0 for all x > 0. For x = 0 the function y′′ (x) is not
1 −2
2x
defined. However, y(x) = x is a standard function of which we know the graph and for
every two points on this graph the line piece connecting the two points is below the graph
of the function. Hence, y(x) is concave.
Exercise 5.32
a) Since y(x) = xe− 21 x2 , we have
1 2 1 2 1 2
y′ ( x ) = e− 2 x + xe− 2 x (− x ) = e− 2 x (1 − x2 ),
1 2 1 2 1 2
y′′ ( x ) = −2xe− 2 x + ( x3 − x )e− 2 x = e− 2 x ( x3 − 3x ).
The zeros of the second order derivative are given by

y′′ ( x ) = 0 ⇔ x3 − 3x = 0
⇔ x ( x 2 − 3) = 0
√ √
⇔ x = 0 or x = 3 or x = − 3.
According to the second order criterion

√ of a convex
√ / concave function √
and the sign√survey
of y′′ (x), y(x) is concave on (−∞, − 3] and [0, 3] and convex on [− 3, 0] and [ 3, ∞).
b) Since y(x) = (ln x)2 , we have
2
y′ ( x ) = ln x,
x
2 1 −1 2
y′′ ( x ) = · + 2(ln x ) · 2 = 2 (1 − ln x ).
x x x x
The zeros of the second order derivative are given by
2
y′′ ( x ) = 0 ⇔ (1 − ln x ) = 0
x2
⇔ ln x = 1
⇔ x = e.
According to the second order criterion of a convex / concave function and the sign survey
of y′′ (x), y(x) is on convex on (0, e] and concave on [e, ∞).
Exercise 5.33
a) y′ ( x ) = e− x is never equal to zero. Hence, y(x) does not have an extremum.
56 Solutions
b) y′ ( x ) = 6x5 + 4x3 = 0 gives x3 (6x2 + 4) = 0 and therefore, x = 0 or 6x2 + 4 = 0. Since

6x2 + 4 > 0 for all x, x = 0 is the only stationary point. Since the function is convex x = 0
is a minimum location.
c) y′ ( x ) = −2x + 4 = 0 gives x = 2. Since the function is concave x = 2 is a maximum
location. 1
d) y′ ( x ) = 1 −2
2x for all x > 0. For x = 0 the function y′ (x) is not defined. However,
>0
1
since x √≥ 0 is the domain of y(x) and y′ (x) = 12 x− 2 > 0 for all x > 0 it holds that
y( x ) = x has a boundary minimum at x = 0.
Exercise 5.34
a) The first and second order partial derivatives are given by
z′x ( x, y) = 2x + 2y + 4, z′y ( x, y) = 2x + 4y − 2,
z′′xx ( x, y) = 2, z′xy ( x, y) = 2, z′yy ( x, y) = 4.
Since
C ( x, y) = 2(4) − 22 = 4 > 0, z′′xx ( x, y) > 0 and z′′yy > 0,
according to the second order criterion, the function z(x, y) is convex.

b) The first and second order partial derivatives are given by
z′x ( x, y) = −6x + 2y, z′y ( x, y) = 2x − 4y,
z′′xx ( x, y) = −6, z′′xy ( x, y) = 2, z′′yy ( x, y) = −4.
Since
C ( x, y) = (−4)(−6) − 22 = 20 > 0, z′′xx ( x, y) < 0 and z′′yy < 0,
according to the second order criterion, the function z(x, y) is concave.

c) The first and second order partial derivatives are given by
z′x ( x, y) = 2x + 4y, z′y ( x, y) = 4x − 2y,
z′′xx ( x, y) = 2, z′′xy ( x, y) = 4, z′′yy ( x, y) = −2.
Since C (x, y) = −2 · 2 − 42 = −20 < 0 the function z(x, y) is neither convex nor concave.
d) The first and second order partial derivatives are given by
2 2
z′x ( x, y) = 2x − , z′y ( x, y) = 2y − ,
x2 y xy2
4 2 4
z′′xx ( x, y) = 2 + 3 , z′′xy ( x, y) = , z′′yy ( x, y) = 2 + .
x y x 2 y2 xy3
Since

4 4 4 8 8 12
C ( x, y) = 2+ 2+ − = 4 + 3 + 3 + 4 4 > 0,
x3 y xy3 x 4 y4 x y xy x y
z′′xx ( x, y) > 0 z′′yy ( x, y) > 0
for x, y > 0, according to the second order criterion, the function z(x, y) is convex.
Exercise 5.35
Chapter 5 57
The first and second order partial derivatives are given by

z′x ( x, y) = 2px + 2py, z′y ( x, y) = 2px + 2y,
z′′xx ( x, y) = 2p, z′′xy ( x, y) = 2p, z′′yy ( x, y) = 2.
If the function is convex, according to the second order criterion, we have

 
2
 C ( x, y) ≥ 0
 2p(2) − (2p) ≥ 0

z′′xx ( x, y) ≥ 0 ⇔ 2p ≥ 0

 ′′ 

zyy ( x, y) ≥ 0 2>0
(
4p(1 − p) ≥ 0
⇔
p≥0
(
0≤p≤1
⇔
p≥0
⇔ 0 ≤ p ≤ 1.
Exercise 5.36
a) The condition for stationary points is
2x + 2y + 4 = 0 ⇔ 2x = −2y − 4
2x + 4y − 2 = 0
Combining these two equations gives

2y − 4 + 4y − 2 = 0 ⇔ y = 3, x = −5
The stationary point as (x, y) = (−5, 3). Since the function is convex (see Exercise 5.34),
this is a minimum location.
b) The condition for stationary points is
− 6x + 2y = 0
2x − 4y = 0
Hence, the stationary point is (x, y) = (0, 0), which is a maximum location due to concavity.
c) The condition for stationary points is
2x + 4y = 0
4x − 2y = 0
There is a saddle point at (x, y) = (0, 0).

d) The appropriate condition is
2 2 1
2x − = 0 ⇔ 2x = 2 ⇔ y = 3
x2 y x y x
2 2
2y − 2 = 0 ⇔ 2y = 2 ⇔ x8 = 1
xy xy
⇒y = 1 or y = −1 x = 1 or x = −1
But recall that x, y > 0. Hence the only stationary point is ( x, y) = (1, 1), which is a
minimum location due to convexity.
58 Solutions
Exercise 5.37
Consider the function y(x) = e− 31 ( x3 +ax−7). The first order derivative is
1 3
y′ ( x ) = e− 3 ( x + ax −7) · (− 31 (3x2 + a)).
To have y(x) decreasing on the whole domain, we need y′ (x) ≤ 0 for all x. It implies
1 3
y′ ( x ) ≤ 0 ⇔ |e− 3 ( x{z+ ax −7) 1 2
} − 3 (3x + a) ≤ 0
>0
⇔ − 31 (3x2 + a) ≤ 0
|{z}
<0
⇔ 3x2 + a ≥ 0
⇔ a ≥ −3x2
for all x. Since −3x2 has a maximum 0 in x = 0, we have

a ≥ −3x2 ⇔ a ≥ 0 ≥ −3x2
⇔ a ≥ 0.
Exercise 5.38
Ifp = 0, then y′ ( x ) = 4x, which implies that y( x ) is decreasing on (− ∞, 0]. If p 6= 0, then
= 3px2 + 4x = 0 gives x = 0 or x = − 3p
y′ ( x ) 4
. If p > 0, then y′ (x) < 0 for − 3p4 < x < 0. If
p < 0, then y ( x ) < 0 for x < 0. Hence, such a p does not exist.
′
Exercise 5.39
Consider the function y(x) = ln( 1x ) + x82 , (x > 0). The first order derivative is
1 1 1
y′ ( x ) = (− ) + 28 x = − + 14 x.
1
x
x2 x
The stationary points of y(x) are given by

1
y′ ( x ) = 0 ⇔ − + 14 x = 0
x
⇔ − 4 + x2 = 0
⇔ x = 2.
If x ∈ (0, 2], y′ ( x ) ≤ 0.
If x ∈ [2, ∞), y′ ( x ) ≥ 0.
According to the monotony criterion, y(2) = ln( 21 ) + 21 is a minimum.

Exercise 5.40
y′ ( x ) = 6x · 53x ln 5. Hence, y′ (x) = 0 if x = 0. It follows that y′ (x) < 0 for x < 0 and
2
y′ ( x ) > 0 for x > 0. Hence, y(0) = 1 is a minimum. Further, y(−1) = 125 is a boundary
maximum.
Exercise 5.41
Chapter 5 59
The first and second order derivatives are

y′ ( x ) = −8x7 + 7x6 + 6x5 + 15x4 − 16x3 − 6x2 + 2x,
y′′ ( x ) = −56x6 + 42x5 + 30x4 + 60x3 − 48x2 − 12x + 2.
Since
y′ (1) = −8 + 7 + 6 + 15 − 16 − 6 + 2 = 0,
y′′ (1) = −56 + 42 + 30 + 60 − 48 − 12 + 2 = 18 > 0,
according to the second order criterion, y(1) is a minimum of y(x).

Exercise 5.42
a) π (y) = 25y − 5y2 + 7y − 10. π ′ (y) = −10y + 32 = 0 gives y = 3 15 . π ′′ (y) = −10 < 0.
Hence, π (3 51 ) = 41 15 is the maximum profit.
b) y . Therefore, π ( y) = py − C ( y) = 100 − 5y + 7y − 10. π ( y) = −10y + 7 = 0
p = 100 2 ′
gives y = 107 . π ′′ (y) = −10 < 0. Hence, the maximum profit is π ( 107 ) = 92 209 .
Exercise 5.43
a) AC (y) = 31 y2 − 3y + 9. AC ′ (y) = 32 y − 3 = 0 gives y = 4 21 . AC ′′ (y) = 23 > 0. Hence,
AC (4 21 ) = 2 14 is the minimum price for which the entrepreneur makes a profit. Hence, he
will not make a profit for p ≤ 2 41 .
b) π (y) = py − C (y) = − 13 y3 + 3y2 + ( p − 9)y. π ′ (y) = − y2 + 6y + p − 9. D = 62 −
√
4(−1)( p − 9) = 4p. Therefore, y = . Since π ′ (y) is√a quadratic function with
−6± 4p
−2
a negative coefficient
√
for the y2 -term, we know that y = −6+−2 4p is a minimum location
and y =−6−−2 4p = 3 + √ p a maximum location. This gives
0 if p < 2 41
y( p) = √
3 + p if p ≥ 2 41 .
Exercise 5.44
a) Consider the cost function C (y) = 101 y3 − 3y2 + 50y. To check whether there will be
production, we compute the minimum of the average costs AC (y) = 101 y2 − 3y + 50. The
derivative of AC (y) is AC ′ (y) = 15 y − 3. The first order criterion gives the stationary
point.
AC ′ (y) = 0 ⇔ y = 15.
Using the sign survey of AC ′ (y), the average costs has a minimum AC (15) = 27 21 . Since
the market price p = 30 > 27 12 , there will indeed be production.
b) Profit is equal to zero when p = AC, i.e., p = 27 12 .
c) Since the producer is a price taker, the revenue is R(y) = py. Given the cost function
C (y) = 10 1 y3 − 3y2 + 50y, the profit equals π ( y) = py − 1 y3 + 3y2 − 50y. The first
10
order derivative
q
is then π ′ (y) = p − 103 y2 + 6y − 50. Setting it equal to zero gives y =
10 ± 35 65 p − 24. From the sign survey of π ′ (y), the profit is maximal when y = 10 +
q
5 6 p − 24.
3 5
60 Solutions
From part a), the average costs has minimum 27 12 . Hence the supply function is defined
by
if p < 27 12
(
0
y( p) = q
10 + 1 23 1 15 p − 24 if p ≥ 27 12 .
Exercise 5.45
q q
a) qA = 2c A d A
hA = 2·500·1000
1 = 1000.
Hence, shop A orders once a year.
q
b) q B = 1000 = gives 1000000 = 1000d
2·500d B
1.5 1.5 , and hence, d B = 1500. Therefore, the
B
fixed yearly demand is 1500.

Exercise 5.46
a) The stationary points of z(x, y) are solutions of
( (
z′x ( x, y) = 0 3x2 − 3y4 = 0
⇔
z′y ( x, y) = 0 −12xy3 − 384 = 0
(
x 2 = y4
⇔
xy3 = −32
(
x = − y2 or x = y2
⇔
xy3 = −32.
When x = −y2 , we have

( (
x = − y2 x = − y2
⇔
xy3 = −32 − y5 = −32
(
x = − y2
⇔
y=2
(
x = −4
⇔
y = 2.
When x = y2 , we have
( (
x = y2 x = y2
⇔
xy3 = −32 y5 = −32
(
x = y2
⇔
y = −2
(
x=4
⇔
y = −2.
Hence, the stationary point are (−4, 2) and (4, −2).

z′′xx ( x, y) = 6x, z′′xy ( x, y) = −12y3 and z′′yy ( x, y) = −36xy2 ,
Chapter 5 61

C ( x, y) = −216x2 y2 − 144y6 .
Since C (−4, 2) < 0 and C (4, −2) < 0, both stationary points are not extrema but saddle
points. Therefore, the function has no optima.
Exercise 5.47
z′y ( x, y) = 2x + 2y = 0 gives y = − x. Plugging this into z′x ( x, y) = 3x2 − 4x + 2y = 0 gives
3x2 − 4x − 2x = 0. Hence, x = 0 or x = 2. The stationary points are therefore ( x, y) = (0, 0)
and (x, y) = (2, −2).
z′′xx ( x, y) = 6x − 4, z′′yy = 2, z′′xy ( x, y) = 2. Therefore, C ( x, y) = 12( x − 1). C (0, 0) =
−12 < 0. Hence, ( x, y) = (0, 0) is a saddle point. C (2, −2) = 12 > 0, z′′xx (2, −2) = 8 > 0 and
hence, z(2, −2) = −6 is a minimum.
Exercise 5.48
The first order partial derivatives are
z′x ( x, y) = 2px + 2py and z′y ( x, y) = 2px + 2y.
Since z′x (0, 0) = z′y (0, 0) = 0, the point (0, 0) is a stationary point. The second order partial
derivatives are
z′′xx ( x, y) = 2p, z′′xy ( x, y) = 2p and z′′yy ( x, y) = 2,
and hence the criterion function is

C ( x, y) = 2(2p) − (2p)2 = 4p − 4p2 = 4p(1 − p).
For a minimum, we require z′′xx (x, y) > 0 and C (x, y) > 0. Both conditions are fulfilled for
0 < p < 1. For C ( x, y) = 0 we can not use the second order criterion. C ( x, y) = 0 if p = 0
or if p = 1. If p = 0, then z(x, y) = y2 and z(0, 0) = 0 is clearly a minimum. If p = 1, then
z( x, y) = ( x + y)2 . Also in that case z(0, 0) = 0 is clearly a minimum. Hence, z(0, 0) is a
minimum for 0 ≤ p ≤ 1.
Exercise 5.49
π ( L, K ) = 16L 4 K 4 − 2L − 4K . Hence, π ′L ( L, K ) = 4L− 43 K 41 − 2 and πK′ ( L, K ) = 4L 14 K − 34 −
1 1
4. Then π K′ ( L, K ) = 4L 4 K − 4 − 4 = 0 results in L = K 3 . Plugging this into π ′L ( L, K ) =

1 3
√ √
4L − 4 K 4 − 2 = 0 results in K = 2 and hence, L = 2 2. Via the second order partial
3 1
derivatives we obtain the criterium function C ( L, K√) =√8L− 2 K − 2 > 0. Moreover, π ′′LL ( L, K ) =
3 3
−3L − 4 K 4 < 0, which√implies

√ that√( L, K ) = (2 2, 2) is a maximum location. Then the
7 1
maximum profit is π (2 2, 2) = 8 2.
Exercise 5.50
1 1
L− 2 K 4
We first find the minimum cost function: gives 4K = L. Substituting in
1
5
2
1
1 − 34
= 10
4 L2 K
the production function gives y = (4K ) 2 K 4 = 2K 4 . Rewriting gives K = 2− 3 y 3 . Hence,
1 1 3 4 4
L = 4K = 2 3 y 3 .
2 4
This gives cost function C (y) = C (2 3 y 3 , 2− 3 y 3 ) = 5 · 2 3 y 3 + 10 · 2− 3 y 3 = 30 · 2− 3 y 3 .

2 4 4 4 2 4 4 4 4 4
62 Solutions
Since C (y 3 , y 3 ) = 25y 3 and C (4y 3 , 161 y 3 ) = 20 58 y 3 result in higher cost functions, C (y) =
4 4 4 4 4 4
30 · 2− 3 y 3 is indeed the minimum cost function.

4 4
The marginal cost function is then given by

4 1 4 1 1
MC (y) = C ′ (y) = 4
3 · 30 · 2− 3 y 3 = 40 · 2− 3 y 3 = 10 · (4y) 3
while average costs are
4 1
AC (y) = 30 · 2− 3 y 3
Hence, AC ′ (y) is never zero for y > 0 and there is a minimum in y = 0. The supply function
therefore follows from p = MC (y). Rewriting p = 10 · (4y) 3 gives y( p) = 4000
p3
, ( p ≥ 0).
1
Exercise 5.51
z( a, b ) = (4 − ( a · 1 + b ))2 + (3 − ( a · 2 + b ))2 + (4 − ( a · 3 + b ))2 + (1 − ( a · 4 + b ))2 .
z′a ( a, b ) = −2(4 − a − b ) − 4(3 − 2a − b ) − 6(4 − 3a − b ) − 8(1 − 4a − b ) = −52 + 60a + 20b =
0 gives a = 52 60 − 3 b. We plug this into z b ( a, b ) = −2(4 − a − b ) − 2(3 − 2a − b ) − 2(4 − 3a −
1 ′
b ) − 2(1 − 4a − b ) = −24 + 20a + 8b = 0, which gives b = 5 and a = − 54 . Of course,

z′′aa ( a, b ) = 60, z′′bb ( a, b ) = 8 and z′′ab ( a, b ) = 20 gives C ( a, b ) = 80 > 0. Combining this with
z′′aa ( a, b ) = 60 > 0 gives that we have found a minimum location. Hence, y = − 54 x + 5.
Exercise 5.52
z( a, b ) = (0 − ( a · 1 + b ))2 + (−1 − ( a · 2 + b ))2 + (3 − ( a · 3 + b ))2 + (q4 − ( a · 4 + b ))2 .
z′a ( a, b ) = −2(0 − a − b ) − 4(−1 − 2a − b ) − 6(3 − 3a − b ) − 8(q4 − 4a − b ) = −14 − 8q4 +
60a + 20b = 0. Since a = 1 and b = −1 21 this gives q4 = 2.
Exercise 5.53
 ′ ( 4x (4x2 +y2 )
 z x ( x,y) = g′x ( x,y) =2
z ′y ( x,y ) gy′ ( x,y ) ⇔ y (4x 2 + y2 )
 g( x, y) = k 2x + y = 12
(
4x
y =2
⇔
2x + y = 12
(
y = 2x
⇔
2x + y = 12
(
y = 2x
⇔
4x = 12
(
y=6
⇔
x = 3.
Hence the point (3, 6) is a candidate for the optimum location.

√ The other possible candidates
are from the boundary: (0, 12) and (6, 0). Since√U (3, 6) = 6 2 < U (6, 0) = U (0, 12) = 12, the
function U (x, y) has a minimum U (3, 6) = 6 2 and boundary maxima U (6, 0) = U (0, 12) =
12.
Exercise 5.54
Chapter 5 63
1 4 2√
1
=
3
gives 3 y = 4
3 and hence, y = 4. Via the restriction we then obtain x = 3.
3· 2 y
√
√
Since z(0, 8) = 3 8 and z(6, 0) = 6, the maximum is z(3, 4) = 9.
Exercise 5.55
1
2 = gives x = 1 12 y. We plug this into the restriction to obtain y = 2. Hence, x = 3. Since
2x
6y
√ √ √ √
z(3, 2) = 7 and z(0, 7) = 2 7, the minimum is z( 21, 0) = 21.
Exercise 5.56
L ( x, y, λ) = x2 + xy2 − λ( x + y − 4).
L ′x ( x, y, λ) = 2x + y2 − λ = 0 and L ′y ( x, y, λ) = 2xy − λ = 0. Hence, 2x + y2 = 2xy, which
gives x = 2(yy−1) . We plug this into L′λ (x, y, λ) = x + y − 4 = 0, which gives 3y2 − 10y + 8 = 0.
2
Using the ’abc’-formula we obtain y = 2 or y = 1 31 . From y = 2 it follows that x = 2 and

λ = 8. From y = 1 13 it follows that x = 2 23 and λ = 7 19 . Hence, the stationary points of the
Lagrange function are (x, y, λ) = (2, 2, 8) and (x, y, λ) = (2 23 , 1 31 , 7 19 ).
Exercise 5.57
Due to the government regulation, the constrained optimization problem becomes
maximize U ( x, y) = x2 y3
subject to x + 3y = 10
where x ≥ 0, 0 ≤ y ≤ 1.
Solving the first order criterion together with the equality constraint gives
 ′ (
 Ux ( x,y) = p x 2xy3
= 1
Uy′ ( x,y ) py
⇔ 3x 2 y2 3
 p x x + py y = 10 x + 3y = 10
(
2y
3x = 13
⇔
x + 3y = 10
(
x = 2y
⇔
x + 3y = 10
(
x = 2y
⇔
5y = 10
(
x=4
⇔
y = 2.
However, y should not exceed one. Hence, the point (4, 2) is not a candidate for the maximum
location. The other candidates are the boundary points: (7, 1) and (10, 0). Note that (0, 103 )
is not considered here, because 103 > 1. Since U (7, 1) = 49 > U (10, 0) = 0, the function
U ( x, y) has a maximum U (7, 1) = 49.
Exercise 5.58
2x 2( x − 1)
2y
=
2( y − 2)
gives y = 2x. We plug this into the restriction, which gives
√
( x − 1)2 + (2x − 2)2 = 10. √This results in x2 − 2x − 1 = 0√. The solutions are x = 1 ± 2.
Since x ≥ 0 only x = 1 + 2 is possible and y = 2 + 2 2 follows from that value of x.
64 Solutions
√ √ √ √
√ z(0, 5) = 25 and z(
Then since 6 + 1, 0) = 7 + 2 6, the maximum is z(1 + 2, 2 + 2 2) =
15 + 10 2.
Exercise 5.59
a) Solving the first order criterion of the constrained optimization problem together with the
 ′ (y
 Ux ( x,y) = p x
Uy′ ( x,y ) py
⇔ x =1
 p x x + py y = I x + y = 12
(
y=x
⇔
x + y = 12
(
y=x
⇔
2y = 12
(
y=6
⇔
x = 6.
Hence the point (6, 6) is a candidate for the maximum location. The other possible can-
didates are from the boundary: (0, 12) and (12, 0). Since U (6, 6) = 36 > U (12, 0) =
U (0, 12) = 0, the utility function U ( x, y) has a maximum at ( x0 , y0 ) = (6, 6) with utility
level 36.
b) Solving the first order criterion of the constrained optimization problem together with the
 ′ (y
 Ux ( x,y) = p x
Uy′ ( x,y ) py
⇔ x =3
 p x x + py y = I 3x + y = 12
(
y = 3x
⇔
3x + y = 12
(
y = 3x
⇔
6x = 12
(
y=6
⇔
x = 2.
Hence the point (2, 6) is a candidate for the maximum location. The other possible candi-
dates are from the boundary: (0, 12) and (4, 0). Since U (2, 6) = 12 > U (4, 0) = U (0, 12) =
0, the utility function U ( x, y) has a maximum at ( x2 , y2 ) = (2, 6) with utility level 12.
c) Solving the first order criterion of the constrained optimization problem together with the
Chapter 5 65
 ′ (y
 Ux ( x,y) = p x
Uy′ ( x,y ) py
⇔ x =3
 p x x + py y = I 3x + y = I
(
y = 3x
⇔
3x + y = I
(
y = 3x
⇔
6x = I
(
y = 2I
⇔
x = 6I .
Hence the point ( 6I , 2I ) is a candidate for the maximum location. The other possible
candidates are from the boundary: (0, I ) and ( 3I , 0). Since U (2, 6) = 121 I 2 ≥ U ( 3I , 0) =
U (0, I ) = 0, the utility function U ( x, y) has a maximum at ( 6I , 2I ) with utility level 12
1 I2.
To solve for the income level that would allow for the initial level of capital, we now need
1 ′2 √
I = 36 ⇒ I ′ = 12 3
12
The required transfer is then
√
I ′ − 12 = 12 3 − 12.
√ √ √ √
Furthermore, x1 = 126 3 = 2 3 and y1 = 122 3 =√ 6 3.
d) The substitution effect of good x is x1 − x0 = 2√ 3 − 6.
The substitution effect of good y is y1 − y0 = 6√ 3 − 6.
The income effect of good x is x2 − x1 = 2 − 2√ 3.
The income effect of good y is y2 − y1 = 6 − 6 3.
The total effect of good x is x2 − x0 = 2 − 6 = −4.
The total effect of good y is y2 − y0 = 6 − 6 = 0.
Exercise 5.60
66 Solutions

 ′ 
−1 1
 Ux ( x,y) = p x  12 x 2 y 4 = 4

Uy′ ( x,y ) py
⇔
1
1 2 −4
3 3
4x y
 p x x + py y = I 
4x + 3y = I
(
2y 4
⇔ x = 3
4x + 3y = I
(
y = 2x 3
⇔
4x + 3y = I
(
y = 2x 3
⇔
6x = I
(
y = 9I
⇔
x = 6I .
The point ( 6I , 9I ) is a candidate for the maximum location. The other candidates are from
3
boundary: (0, 3I ) and ( 4I , 0). Since U ( 6I , 9I ) = 1I 4 1 ≥ U (0, 3I ) = U ( 4I , 0) = 0 for I ≥ 0, the
62 94
function U (x, y) has a maximum at ( 6I , 9I ). Hence, U ( 6I , 9I ) = ( 61 ) 12 ( 19 ) 14 I 43 .
Exercise 5.61
K (K + 2L ) − LK · 2 K2 1
a) = = gives 8K 2 = 2L2 and hence, L = 2K . Plugging this into
L (K + 2L ) − LK 2L2 8
the production function gives K = 2 12 Y. Hence, L = 5Y. Hence, C (Y ) = (5 + 8 · 2 12 )Y =
25Y. This is the minimum cost function as C ( 35 Y, 5Y ) = 41 23 Y and C (10Y, 20
9 Y ) = 27 9 Y .
7
b) p(Y ) = 31 − 2 Y. Hence, π (Y ) = pY − C (Y ) = 31Y − 2 Y − 25Y, which gives

1 1 2
π ′ (Y ) = − y + 6 = 0. Since π ′′ (Y ) = −1 < 0 it holds that π (6) = 18 is the maximum

profit.
Exercise 5.62
a) U (µ S , σS ) = U (0.05, 0) = 0.05 < 0.08 = 0.1 − 2 · 0.12 = U (0.1, 0.1) = U (µ A , σA ). Hence,
the investor prefers investing in stock A.
b) U (µ, σ) = 0.05w1 + 0.1w2 − 2 · 0.12 w22 = 0.05 + 0.05w2 − 0.02w22 = u (w2 ). Hence,
u ′w2 (w2 ) = 0.05 − 0.04w2 = 0 gives w2 = 1 14 . Hence, there is no stationary point in
the domain. Hence, the maximum is located at the boundary. By part a) we know the
investor prefers stock A to savings account S, hence w1 = 0, w2 = 1.
Exercise 5.63
a) U (µ S , σS ) = U (0.05, 0) = 0.05, U (µ A1 , σA1 ) = U (0.1, 0.1) = 0.1 − 4 · 0.12 = 0.06 and
U (µ A2 , σA2 ) = U (0.05, 0.1) = 0.1 − 4 · 0.12 = 0.02. Hence, the investor prefers investing in
stock A1 .
b) U (w1 , w2 , w3 ) = 0.05w1 + 0.1w2 + 0.05w3 − 0.04w22 − 0.04w23 + 0.02w2 w3 = 0.05 + 0.05w2 −
0.04w22 − 0.04w23 + 0.02w2 w3 = u (w2 , w3 ). From u3′ (w2 , w3 ) = −0.08w3 + 0.02w2 = 0 we
obtain w2 = 4w3 . Plugging this into u2′ (w2 , w3 ) = 0.05 − 0.08w2 + 0.02w3 = 0 gives
w3 = 61 and hence, w2 = 23 and w1 = 16 .
′′ (w , w ) = −0.08, u ′′ (w , w ) = −0.08 and u ′′ (w , w ) = 0.02 gives C (w , w ) =

Further, u22 2 3 33 2 3 23 2 3 2 3
0.006 > 0, which in combination with u22 ′′ (w , w ) < 0 gives that (w , w ) = ( 2 , 1 ) is a
2 3 2 3 3 6
Chapter 5 67
maximum location of u(w2, w3 ). Hence, w1 = 61 , w2 = 23 , w3 = 16 .

Exercise 5.64
y′ ( x ) = −4x + 3 + x1 , y′′ ( x ) = −4 − 1
x2
<0 for all x in the domain. Hence, y( x ) is never
convex, y(x) is concave if x > 0.
Exercise 5.65
8
y′ ( x ) = 2x − 10 +
x
8
y′′ ( x ) = 2 −
x2
If x > 2, then x2 > 4 and 8

x2
< 2, hence y′′ (x) > 0, implying convexity.
Exercise 5.66
Via = 3x2 + 3y and z′y ( x, y) = 3x + 6y2 we get z′′xx ( x, y) = 6x, z′′yy ( x, y) = 12y,
z′x ( x, y)
′′ 3. Therefore, C ( x, y) = 72xy − 9. C ( x, y) ≥ 0 if xy ≥ 81 . Then the second
z xy ( x, y) =
order partial derivatives determine whether the function is convex or concave. Hence, z(x, y)
is convex if y ≥ 8x1 and x > 0, z(x, y) is concave if y ≤ 8x1 and x < 0.
Exercise 5.67
z′x ( x, y) = 2ax + 6y z′y ( x, y) = 6x + 2y

z′′xx ( x, y) = 2a z′′xy ( x, y) = 6 z′′yy ( x, y) = 2
⇒C ( x, y) = 4a − 36 ≥ 0 ⇔ a ≥ 9
z′′xx ( x, y) = 2a ≥ 0 ⇔ a ≥ 0
z′′yy ( x, y) = 2 > 0 for all a
Hence, the function is convex for a ≥ 9.
Exercise 5.68
a)
z′x ( x, y) = 2 − 2x + 2y z′y ( x, y) = −20 + 2x − 8y
z′′xx ( x, y) = −2 < 0 z′′xy ( x, y) = 2 z′′yy ( x, y) = −8 < 0
C ( x, y) = 28 > 0
Hence, the function is concave.

b) We need
2 − 2x + 2y = 0
and
−20 + 2x − 8y = 0
68 Solutions
to hold simultaneously. Solving this system of equations, for example by adding both
equations up, gives the stationary point as
y = −3 x = −2
This is a maximum, due to the concavity of the function. Hence, z(−2, −3) = 28 is a
maximum value. There is no minimum value.
6
Exercise 6.1
a) F ( x ) = 5x + c, where c is an arbitrary constant.
b) F ( x ) = 1 12 x2 + c, where c is an arbitrary constant.
c) F ( x ) = 2x3 + c, where c is an arbitrary constant.
Exercise
R 6.2
a) 6
−2 5 dx = [5x ]6−2 = 5(6) − 5(−2) = 40.
h i4
b) 0 3x dx = 1 2 x 0 = 1 2 (4) − 1 2 (0) = 24.
R4 1 2 1 2 1 2
c) 1 6x dx = 2x 1 = 2(3 ) − 2(1) = 52.

R3 2 3 3 3 3
Exercise 6.3
√ √
a) 3
f (x) = x x = x 2 , F (x) = 2
5 x 2 = 52 x2 x.
5
b) 1
f ( x ) = e− 2 x , F ( x ) =
1
−2e− 2 x .
c) f ( x ) = x12 = x −2 , F ( x ) = − x −1 = − 1x .
d) q ( p) = 3 p2 = p 3 , Q( p) = 53 p 3 = 53 p 3 p2 .
p 2 5 p
√ √
e) w( L ) = L3 L = L 2 , W ( L ) = 92 L 2 = 92 L4 L.
x
7 9
f) y( x ) = 4− x = 14 , Y ( x ) = ln 1 = − ln 4 .
4− x 4− x
4
Exercise 6.4
R1 √ h
2 2 √x
i1
a) 0 x x dx = 5 x = 52 .
h 0
i 2
b) dx = −2e− 2 x = (−2e− 2 ·2 ) − (−2e− 2 ·1 ) = 2(e− 2 − e−1 ).
R 2 −1x 1 1 1 1
1 e
2
1
h i4
c) x 1 = −4 + 1 = 4.
R4 1 1 1 3
1 x 2 dx = −
h i
5 8
d) 5 = 19 5 .
R8p
0
3
p2 dp = 53 p 3 = 96 1
0
R 64 √ h √ 64 i
e) 0 L L dL = 9 L
2 4 L
0
= 29 = 29826161 79 .
28
h − x i1 4− 1 41 33
f) )= 4 .
R 1 −x
−1 4 dx = − 4ln 4 = (− ) − (−
−1 ln 4 ln 4 ln 4
Exercise 6.5
a) G (t) = 1 13 e3t + 3 ln t.
b) F ( x ) = 1 12 x2 + ln2 2 .
x
√ 2 √
c) y(t) = t + 1t = t + √2 +
t
1
t2
, Y (t) = 1 t2
2 +4 t− 1
t .
69
70 Solutions
Exercise 6.6 h ie
a) dt = 1 31 e3t + 3 ln t = 1 13 e3e + 3 − 1 13 e3 = 1 31 (e3e − e3 ) + 3.
Re 3
1 4e3t + t
h i2 1
b) ln 2 1 = 4 2 + ln 2 .
R2 x dx = 1 1 x2 + 2 x 1 2
1 3x + 2 2
R 4 √ 2 h √ i4
c) 1 t + 1t dx = 12 t2 + 4 t − 1t = 12 14 .
1
Exercise 6.7
a) 0R 5 dx = [5x ]0 = 15.
R3 3
O( f , 0, 3) =
b) 16 1
0 = 2 16 = 128.
O( f , 0, 16) = 0 x dx = [ 2 x2 ]16 1 2
c) O( f , 0, 1) = 0 3x dx = [ x3 ]10 = 1.
R1 2
Exercise 6.8
a) −2 dx = − [−2x ]40 = 8.
R4
O( f , 0, 4) = − 0
h i4
b) − x dx = − − 21 x2 = 7 12 .
R4
O( f , 1, 4) = − 1 1
Exercise 6.9
a) The zeros of the function f (x) are x = 0, x = 1 and x = 3. From the sign survey of
f ( x ), the function is positive on [0, 1], negative on [1, 3] and positive on [3, 4].The area is
therefore given by
Z 1 Z 3 Z 4
O( f , 0, 4) = x3 − 4x2 + 3x dx − x3 − 4x2 + 3x dx + x3 − 4x2 + 3x dx
0 1 3
h i1 h i3 h i4
1 4
= 4x − 43 x3 + 23 x2 − 14 x4 − 43 x3 + 32 x2 + 41 x4 − 43 x3 + 32 x2
0 1 3
= 5 − −2 41 − 125 + 2 2 − −2 1
12 3 4
= 8.
.
b) The zeros of the function f (x) are x = 1 and x = 4. From the sign survey of f (x), the
function is positive on [0, 1], negative on [1, 4] and positive on [4, 6]. The area is therefore
given by
Z 1 Z 4 Z 6
O( f , 0, 6) = x2 − 5x + 4 dx − x2 − 5x + 4 dx + x2 − 5x + 4 dx
0 1 4
h i1 h i4 h i6
= 1 x3 − 52 x2 + 4x − 1 x3 − 52 x2 + 4x + 1 3 − 52 x2 + 4x
3 0 3 1 3x 4
= 15.
c) The zero of the function f (x) is x = 1. From the sign survey of f (x), the function is
negative on [0, 1] and positive on [1, 4]. The area is therefore given by
Z 1 Z 4
O( f , 0, 4) = − e x − e dx + e x − e dx
0 1
= − [ e − ex ]10 + [e x − ex ]41
x
= −(e − e − 1) + e4 − 4e − 0
= e4 − 4e + 1.
Exercise 6.10
Chapter 6 71
a) First, we determine all possible intersection points. Since

f ( x ) = g( x ) ⇔ 2x − 1 = −2x + 2
3
⇔x= ,
4
the intersection point of f (x) and g(x) is ( 43 , 12 ). Similarly, ( 21 , 0) and (1, 0) are the inter-
section points of f (x) and the x-axis, and of g(x) and the x-axis, respectively.
Therefore, the area is given by
Z 3 Z 1
Area I + Area II = 1
4
f ( x ) − 0 dx + 3
g( x ) − 0 dx
2 4
Z 3 Z 1
4
= 1
2x − 1 dx + 3
−2x + 2 dx
2 4
h i3 h i1
4
= x2 − x 1 + − x2 + 2x 3
2 4
= 9 − 3 − 1 + 1 −1+2+ 9 − 3
16 4 4 2 16 2
= 1.
8
b) We proceed in the similar manner as above. The intersection points of f (x) and g(x) are
given by
f ( x ) = g( x ) ⇔ x2 = x
⇔x=0 or x = 1.
From the sign survey of f ( x ) − g ( x ), the enclosed area is equal to
Z 1 Z 1
g( x ) − f ( x ) dx = x − x2 dx
0 0
h i1
1 2
= 2x − 13 x3
0
= 1 1
2 − 3
1
= 6.
Exercise 6.11
We replace the upper bound with t,
Z t Z t h it
1 1
dx = x −3 dx = − 21 x −2 = − 2 + 12 .
1 x3 1 1 2t
As t → ∞, we have 2t2 → ∞ and hence, − 2t12 → 0. Consequently,

Z ∞
1 1
dx = 0 + 2 = 21 .
1 x3
Exercise 6.12
a) The consumer surplus is the surface area enclosed by the graph of the inverse demand
function, the p-axis and the line p = 25. See Chapter 7 for the figure.
72 Solutions
b) Solving the demand function for variable p gives

√ √
q = 36 − 4 p ⇔ 4 p = 36 − q
√ q
⇔ p = 9−
4
2
⇔ p = 9 − 41 q .
2
Hence, the inverse demand function is p(q) = 9 − 41 q with 0 ≤ q ≤ 36. Given the
√
equilibrium price p = 25, the equilibrium quantity is q = 36 − 4 25 = 16. We calculate the
consumer surplus as the integral of the inverse demand function p(q) minus the function
p = 25 over the interval [0, 16], which is
Z 16 2
Z 16
1 2
9 − 14 q − 25 dq = 81 − 92 q +− 25 dq
16 q
0 0
h i16
= 81q − 94 q2 + 48
1 3
q − 25q = 405 13 .
0
c) Now we calculate the consumer surplus as the integral of the demand function q( p) over
the interval [25, 81], which is
Z 81
" #81
√ 4 3
36 − 4 p dp = 36p − 3
p 2 = 972 − 566 23 = 405 13 .
25 2 25
Exercise 6.13
First of all, f ( x ) ≥ 0 for all x ≥ 0.
Further, 0 7e dx = −e−7x 0t =R −e−7t + e0 = −e−7t + 1. If t → ∞, then −7e−7t → 0,
R t −7x
which means we can conclude that 0∞ 7e−7x dx = 1.

Exercise 6.14
dx = [cx ]52 = 3c = 1, hence c = 31 . Note that on the whole domain.
R 5 1
2 c f (x) = 3 ≥0
Exercise 6.15
7e−7x dx = −7e−7x 0 = (− e−35 ) − (−1) = 1 − e−35 .
R5 5
P [ Y < 5] = P [ Y ≤ 5] = 0
Exercise 6.16
f ( x ) dx = [ F ( x )]40 = ln 17 − ln 1 = ln 17.
R 4
0
Exercise 6.17
The statement is false, since
( F ( x ) G ( x ))′ = F ( x ) g( x ) + f ( x ) G ( x )
which is not equal to f ( x ) g( x ) in general. To verify, take for example f ( x ) = g( x ) = 1.
Exercise 6.18
The zeros of the function f (x) = x(x − 3)(x − 4) are x = 0, x = 3 and x = 4. From the sign
survey of f (x), the function is Rpositive on [0, 3] and [4, ∞) and negative on (−∞, 0] and [3, 4].
The enclosed area is equal to 0p f (x) if f (x) ≥ 0 on [0, p], which implies 0 ≤ p ≤ 3.
Exercise 6.19
Chapter 6 73
Since f (x) = ex3 +x2 +5x , f (0) = 1 and f (1) = e7 . Due to the convexity of f (x), the curve
f ( x ) lies below the line segment connecting (0, 1) and (1, e7 ) in the interval [0, 1]. This line is
given by
y = (e7 − 1) x + 1.
Therefore, we have
Z 1 Z 1
f ( x ) dx < ((e7 − 1) x + 1) dx
0 0
h i1
= 12 (e7 − 1) x2 + x
0
= 21 (e7 − 1) + 1
= 12 (e7 + 1).
Exercise 6.20
The enclosed area is
Z 4 Z 4√
1
f ( x ) − g( x ) dx = x−
dx
1 1 x2
4
√ 1
= 23 x x +
x 1
= 16 + 1 − 2 −1
3 4 3
= 3 11
12 .
Exercise 6.21 h i2
a) 02 x2 − 3x + 2 dx = 31 x3 − 32 x2 + 2x 0 = 38 − 6 + 4 = 23 .
R
b) The zeros of the function f (x) = x2 − 3x + 2 are x = 1 and x = 2. From the sign survey
of f (x), the function is positive on [0, 1] and negative on [1, 2]. The area is therefore given
by
Z 1 Z 2
O(y, 0, 2) = ( x2 − 3x + 2) dx − ( x2 − 3x + 2) dx
0 1
h i1 h i2
= 31 x3 − 32 x2 + 2x − 13 x3 − 32 x2 + 2x
0 1
1 3 8 1 3
= − 3 2 +2− 3 +6−4+ 3 − 2 +2
= 1.
Exercise 6.22
f ( x ) = g( x ) ⇔ −2x + 9 = x2 + 1
⇔ x2 + 2x − 8 = 0
⇔ ( x + 4)( x − 2) = 0.
Hence, x = −4 and x = 2.hThen the areaiis given by
2
= −((−9 31 ) − (26 23 )) = 36.
R2 2 1 x3
− −4 x + 2x − 8 dx = − 3 + x2 − 8x
−4
74 Solutions
Exercise 6.23 4
1
= 2 + 21 ln(4).
R4
√1 1 1
1( x + 2x ) dx = 2x 2 + 2 ln( x )
1
Exercise 6.24
f ( x ) = g( x ) ⇔ x3 = x
⇔ x3 − x = 0
⇔ x ( x2 − 1) = 0.
Hence, x = 0, x =
h
−1 and x = 1. Then Area I is given by
i0
= (0 − 0) − ( 41 − 12 ) = 41 . Further, Area II is given by
R0 3 1 x4 − 1 x2
−1 x − x dx = 4 2
h i1 −1
. Hence, the total area is 12 .
R1 1 2
0 x − x3 dx = 2x − 14 x4 = ( 21 − 41 ) − (0 − 0) = 1
4
0
Exercise 6.25
We replace the upper bound with t,
Z t t 1
e− x dx = − e− x 0 = − t + 1.
0 e
As t → ∞, we have et → ∞ and hence, − e1t → 0. Therefore,
Z ∞
e− x dx = 0 + 1 = 1.
0
Exercise 6.26 h i −3
= (e−3 + 65 (−3)−6 ) − (et − 65 t−6 ). As t → − ∞, then
R −3
t (e x − 5
x7
) dx = e x + 56 x −6
t
et →0 and 5 −6
6t →0 . Hence, the area is given by e −3 + 5
6 (−3)
−6 = 5
4374 + 1
e3
.
Exercise 6.27 h it
. If t → ∞, then 2t5 → 0. Hence,
R t 5+ x 5+ t 5+1 5 t
1 f ( x ) dx = 2x 1 = 2t − 2· 1 = 2t + 2t − 3 = −2 21 + 5
2t
.
R∞ 1
1 f ( x ) dx = −2 2
Exercise 6.28
Demand and supply are in equilibrium when
√ √
Xd ( p) = Xs ( p) ⇔ 12 − 3 p = p
√
⇔ 4 p = 12
√
⇔ p=3
⇔ p = 9.
Hence, the equilibrium price is p = 9. Note that when p = 9, then x = 3. Now we first
determine the inverse demand function:
√ √
x = 12 − 3 p ⇔ 3 p = 12 − x
√ 1
⇔ p = 4− x
3
1
⇔ p = (4 − x )2 .
3
Chapter 6 75
Hence the inverse demand function is given by pd (x) = (4 − 31 x)2 , (0 ≤ x ≤ 12). The
consumer surplus equals the integral of the inverse demand function pd (x) minus the function
p = 9 on the interval [0, 3]:
Z 3 Z 3
1 1 2 8
(4 − x )2 − 9 dx = x − x + 7 dx
0 3 0 9 3
3
1 3 4 2
= x − x + 7x
27 3 0
=(1 − 12 + 21) − 0
=10.
One can also calculate the consumer surplus as the integral of the demand function Xd ( p)
over the interval [9, 16] (make a picture of both areas), which is
Z 16 Z 16
√
Xd ( p) dp = (12 − 3 p) dp
9 9
h i
3 16
= 12p − 2p 2
9
3 3
=(12 · 16 − 2 · 16 2 ) − (12 · 9 − 2 · 9 2 )
=10.
Exercise 6.29 h i10

= 50c = 1. Hence, c = 501 , in which case for all 0 ≤ x ≤ 10.
R 10 1 2
0 cx dx = 2 cx 0 f (x) ≥ 0
Hence, c = . 1
50
Exercise 6.30
gives c = 24. Then for all x ≥ 0.
R t c t
2 x4dx = − 3c x −3 2
= (− 3c t−3 ) − (− 3c · 18 ) = 1 f (x) ≥ 0
Hence, c = 24.
7
Figures
1.1a) 1.4a) 1.19c)

y y p
y( x )
400 qd
qs
4 y( x )
2
x
− 32 0 4
x
5 100
z( x ) z( x )
0 400
q
3.2a) 3.2bi) 3.2c)

x2 y y
k=2
k=1 k = −1 x
k = −2
x1 x
3.4b) 3.5b) 3.6c) (U A )

y y µ
U = 10
10
U=6
UA = 3
U=4 U=5 UA = 2
5
U=2 UA = 1
U=2
2
U=1
1
x 0 σ
12 5 10
x
77
78 Solutions
3.6c) (UB ) 3.10ab) 3.11a)

µ x2 K
a)
12
UB = 3
UB = 2
b)
4
UB = 1
σ 0 L
6 12
x1
3.12a) 4.18aii) 4.18bi)

y y y
15 F = 15
p2 3
10 F = 15 F = 10
p2 2
F = 10
5 F=5
p2 1
F=5
3
0 5 10 15
x 0 2.5 5 7.5
x
p1 p1 p1
0 8
x
5.19ab) 6.12a)
y p
z = 100 81
10
z = 50
z = 25
25
0 10
x 0 16 36
q

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Solutions to

x + px + 3, D = p − 12. D > 0 implies p > 12 or p < − 12.

c) Substitute x2 = p. Then 3p2 − 7p + 2 = 0 gives p = 2 or p = 13 . Hence, x2 = 1

Hence, the intersection point is (1, y1 (1)) = (1, 27).

c) See Chapter 7 for the figure.

Hence, (q, p) = (200, 200).

At the break-even point, we have

For both quantities we

Exercise 1.21 (Second edition: 1.22)

From the sign survey of h(x), it follows that x3 + 2x ≤ 3x2 if x ≤ 0 or 1 ≤ x ≤ 2.

b) Since y(x) = − x2 − x + p = 0, D = 1 + 4p. In order to have two zeros, D has to be

D = 64 − 6 + p < 0 ⇒ p < −58.

Exercise 1.23 (Second edition: 1.24)

Exercise 1.24 (Second edition: 1.25)

Exercise 1.25 (Second edition: 1.26)

Hence, the intersection point is (x, y) = ( 12 , 0).

h( x ) = 0 ⇔ 2 · 3 log( x ) − 9 log(8x2 ) + 9 log(81x ) − 2 = 0

c) P (y) = 10y , P ′ (y) = 10y ln 10.

b) Applying the product rule twice, we have

c) Applying the quotient rule, we have

Hence, %∆D = −3 3611

Then it follows that

b) We proceed as above. y (1) = 2 and thus x(2) = 1. The derivative is

c) The elasticity of inverse demand is

d) At p = 6, The elasticity of demand is ǫ(X) = − 23 . Since X(6) = 2, the elasticity of

y (2 + 3) − y (2) 52 /(10 + 1) − 22 /(4 + 1) 25/11 − 4/5 27

b) Consider the function y(x) = x2

the difference quotient of y(x) in x = 2 at a change of ∆x is given by

As a result, the tangent line is equal to

Solving the first equation gives

Next, we check whether these x0 ’s satisfy the second equation:

D > 0 ⇔ 4p2 − 36 > 0

Hence, x(y) = −5y

Hence, x(y) = 7+2y

b) y(0) = 1. y (x) = 3x − 4x + 2 + 4 ln 4. y (0) = 2 + ln 4. Hence, x′ (1) = ln(41)+2 .

c) y(1) = − ln 2. y′ (x) = x+x 1 · x( x++11−)x2 = ( x+11) x . y′ (1) = 12 . Hence, x′ (− ln 2) = 11 = 2.

x > 2. See Chapter 7 for the corresponding figure.

See Chapter 7 for the corresponding figure.

See Chapter 7 for the corresponding figure.

b) Using the results from part (a), we have

c) The marginal product of capital is FK′ ( L, K ) = 2L 35 K − 53 . At ( L, K ) = (200, 400),

∆F ≈ FL′ (200, 400)∆L + FK′ (200, 400)∆K

According to the chain rule of a composite function, we finally get

Z ′ (t) = 2t(3t − 4)3 + t2 · 3(3t − 4)2 · 3

Z ′ (4) = 2 · 4(3 · 4 − 4)3 + 9 · 42 (3 · 4 − 4)2 = 13312.

According to the chain rule of a composite function, we finally obtain

Solving the level curve with level 20 for K gives

Then differentiate to find the slope at L = 4

Substituting (x1 , x2 ) = (2, 1), we obtain

And, the slope at (4, 9) is

The slope at (1, 2) is given by

2 · 5 < 5 · 4, which means that the function behaves as 2L. Hence,

Evaluated at (x, y) = (2, 1), we have

b) Then the slope s in point (8, 4) is given by

c) By definition, it holds that MRTS(8, 4) = −s. Hence

According to the chain rule of a composite function, we finally obtain

Since, 2 = −3 · 1 + b we obtain b = 5, which gives y = −3x + 5.

2a = b. Therefore, 1 = 18b − 2 · 4, which gives b = 6 and therefore a = 3. Hence, a = 3,

Then we know that the slope s of the tangent line is

which we need to be equal to 3. Hence, we must have

Hence, a = 1. Then the utility level is U (1, 3) = 3e.

The zeros of y′ (x) are given by