Differentiation and use in Business Problems ||477 4 BUSINESS PROBLEM SOLUTION problem: The cost ¢ of manufacturing a certain article is given by the formula 4 2 —+3x e254 gotution? Given C =5+ 48x71 43x? : IC = 48? ‘dx w+ 6x dC z —= +> 48x" +6x=0 =-Br6x=0 dx x -48+6x° : =—a 0 3-846 =0 6x =48 =>x=2? =x=2 =25.46 =oF*S =18, which is positive. So the function is minimum at x = 2. 48 0. So the required minimum cost, Cin = 5-+—+ 3x" x =5+ S30) =5+24+12'=41 Answers: Minimum value of C is ,Cyiy = 41 Problem-2: A company finds that it can sell out a certain product that it produces, at the rate of Tk.2 per unit, It estimates the cost function of the product to be F 1% |100041 4) for q tinits produced. 2150 (i) Find the expression for the total profit, if q units are produced and sold. (ii) Find the number of units produced that will maximize profit. (il) What is the amount of this maximum profit? (iv) What would be the profit if 6000 units are produed? Solution: { Given price per unit (p)=2478 || Business Mathematics cost function ()-[1 (2) ] =1000+4 We know, Revenue (R) = price X quantity =pxq =2q «Profit (y)= Re venue(R)-Cost(C) 2 =y=R-C Sys 4 y Cc ys2q {1000 ) ¢ => y= 2q-1000- 5000 . Which is the required expression of total profit. (Ans) 2 (ii) We have profit (y)=2q-1000-—2_ profit (y)=2q 5000 For maximum or minimum, dy 24 292-24 <0 = 2q=10000 > 9 = 5000 dq 5000 2 : When x= 5000, then 2 yy _ 2 nich is negative. So the profit function is maximura at x= 5000. dq 5000 Answers: Required units (g)= 5000 units. © iii) When g=5000, then Required maximum profit(y)=2q~1000——4—— = 2(5000)-1000 - 50007. = 10000 - 1000-5000 = Tk.4000 Answers: Maximum profit = 7k.4000. (iv) When q= 6000, then * Required profit(y)=2q-1000-— =2(6000)-1000- =12000 - 1000-7200 = 7.3800 [Ans.] Answers: Required profit = Tk.3800. (6000)" 50004 Dilferontiation and use In Business Problems ||479 aon bine and storing ree Mean a fot size (x) which minimizes the total cost (T) al for a c aeursrit doting the time rent fora certain period to fulfill a given rate of demand for nate demanded ia 10000 units per year, the cost of material is Tk. 2 per unit, the cost of Feet Of storing meee crial Pet oder, regardless of the seze order (x), is Tk. 40 per order, and the cost of storing material is 10 percent per year on the taka value of the average inventory 3) on hand. 2 Show that T= 200004 400000 , x (i) Find the economic lot size. Solution: (i) We know, - tual Cost (T)= Fixed Cost (FC)+ VariableCost (ve) 2=T=FC+VC => T= FC + Odering Cost(OC)+ Storing Cost (SC) [-. Ve = Ordering Cost + Storing Cost] 10 : 00000 27=(210000)+ O00 5 axtos0x{£ =T=20000+4! nore 2 2. 100 27 =20000+ 400000, * ishown} x 10 {i We know, economic lot size = number of units at rinimum cost Here T = 20000 + 400000 = = 20000 + 400000x7 + = x 10) 10 2A 240000007 +L a 10 For maximum or minimum, 7 . -4qo000x2+t=o A000, Lg = 1 _ 400000 > to x10 10. x? 000000 => x? =(2000) = x=2000 2000, then i 3 800000 _ 800000 800000x =——— x (2000) =0,0001, which is positive. So the cost function is minimum at x = 2000. “Required economic lot size =2000 units. [Ans.] Problem.4: A firm has to produce 144000 units of an item per year. It costs Tk, 160 to make the cio run of the item regardless of units x produced in a run, The cost of Matera eee oct d the cost of string the material is SO paise per item per year on the * . ¢480 || Business Mathematics average inventory (Z)m hand. Show that the total cost Cis given ¥ 23040000 | x x 4 toe Find also the economic lot size, i.c., value of x for which C is minimum, Solution: Part-I We know, Total Cost (C)= Fixed Cost (FC)+ VariableCost(VC) =C=FC+VC = => C=FC+0C+SC C= (5x144090}+ SPRAO0® +0 50x{ =) "C=720000+ = C= 720000 + 23040000 , 1. x TTR go hee g > C= 720000 + 200000 , = [Shown] x " Part 23040000 , x . 4 2 =720000 + 23040000x'+% 4. a3040000x2 41 £C ~ a6ogoo00x . 4 dx 4 dx’ Here C=720000+ 2 000 For maximum or minimum, « 0 => -23040000x7 + ; =0 5-230 = 5 = Baloo => x? = 92160000 = x* = (0600)? = x= 9600 z a When x = 9600, then 2 £C _ 450800007 = S5080000 = S60EO0O0 dx x (9600) 0.000052 , which is positive. So the cost function is minimum at x = 9600, ~- Required economiclotsize= 9600 units, [Ans] Problem-5: A company has to manufacture 36000 units of an item per year. It costs Tk. 25010 make the factory ready for a product run of the item regardless of units x produced in a run. The cost of material per unit made is Tk. 5 and it costs 50 Paise per yéar.for each unit for storing 0Differentiation and use In Business Problems || 481 , x pe_average Inventory (3) in hand. Show that the total cost Cis given by c- SASE + 1300004 8, x pind also the economic lot size, ie, value of x for which C is minimum. Part solution: We know, Total Cost(C) = Fixed Cost(1°C)+ VatiableCost(VC) aceFCHVC => C=FCHOCHSC # 25036 2C=(5x36000}+ 7ST 050x{ 2) = c=1s00004 250726000, 250x36000 ae +180000++ [Shown] Part 11 250x 36000 7 tee C= 22035000 4 g0c004 = = 90000003" + 180000 + # x «<> =18000000x7 a. For maximum or minimum, . C9 900000027 +120 = 200000 1-9 a 4 4 ae = x* = 36000000 = x? = (6000) x > x= 6000 When x = 6000, then . ac 18000000 _ 18000000 P= 18000? Lee. = 8000000." = ‘eo00y =0.000083, which is positive. So the cost function is minimum at x = 6000 . + Required economic lot size =6000 units. [Ans.] 4% =X= 2 Problem-6: A company notices that higher sales of a particular item which it produces are ‘hieved by lowering the price charged. As a result the total revenue from the sales at first rises 4S the number of units sold increases, reaches the highest point and'then falls off. This pattern of ‘otal revenue is described by the relation Y= 4000000 - (x-2000)* Where y is the total revenue and x the number of units sold. 63482 ||Business Mathematics w@ Find, what number of units sold' maximizes total revenue? di ‘What is the amount of this maximum revenue? Gil) What would be the total revenue if 2500 units were sold? Soluti 4000000 - (x - 2000)" =>) ~4000:+4000000) => y = 4000000 - x? +4000 ~ 4000009 : 2 >y eM 2-24 4000 gel =-2 a dx For maximum or minimum, Wo = -2x+4000=0 => -2x+4000=0 = = 2x =4000 = x= 2099 dx When x= 2000, then 2, which is negative. So the revenue function is maximum at x = 2000. + Required revenue maximizing units (x)= 2000 units. [Ans.] Gi) When x= 2000, then ++ Required maximum revenue (y)= 4000000 -(x-2000)? = 4000000 — (2000- 2000)" = 7k.4000000 [Ans.] (iii) When x = 2500 then . +-Re quired revenue(y) = 4000000 - (x- 2000)’ = 4000000 - (2500 — 2000) : = 4000000250000 =7k.3750000[Ans.] Problem-7: A sitar manufacturer notices that he can sell x sitars per week at p taka each where 5x=375-3p. The cost of production is (soo-13:+ 3°) taka. Show that the maximum Profit is obtained when the production is 30 sitars per week, Solution: Given C = 500+ 13x+ ; x? Here 5x=375—3p => 3p=375-5x = p=3I5=5e ai a : aaa We know. Revenue = pricex quantity => R= pxx = R= (BS as =>R —Differentiation and use in Business Problems || 453 profit(y)= Revene(R)~Cost (C) -)-(s00 13004") 5 2 se 5 = 8 gz ya lt? 375 3 3 = {ee} => 56x _ 336 15 3 nis =-3S whieh is negative. So the profit function is maximum at x= 30. roblen-8: If the demand function of the monopolist is 3¢=98-A4> ‘and average cost is q+ 2. where q is output and p is the price, find maximum profit of the monopolist. olution: Given Average Cost (AC) =3q+2 “Total Cost (TC) = ACxq 3TC=(34+2)xq => TC =3q° +24 Marginal Cost(MC)=—(rc) dq oMc= (34° +24) = MC=6q+2 iq. | 98-3 98 3 Here 3q=98-4p = 4p = 98-34 = peat spay We know, Total Revenue (TR)= price xquantity 3a 8 3 8 TR = pxq => TR= (?- i) q = TR=— A= “Marginal Revene(MR)= ure)404 || Buainoos Mathomatica san = F(t) = any 8S dq 4g Under monopoly business, profit will be maximum at MC = MR. MC=MR 3642298 of y+ 36 “ = 2lq+8=98-6q = 309=90 4.3 d So the maximum profit of the monopolist will be obtained at g = 3. When q = 3, then Required maximum profit (y)=7R-7C 98q_3¢° : 984 _ 39° 983) _ 33) aay (BEA aay) 584-8? ag 8) 2EP yyy 27-6 =73,5-6.75-27-6 =7k.33.75 [Ans.] Problem-9: Find the profit maximizing output given the following revenue and cost functions: R(q)= 1000-24 C(q)= 4? -59q? +1315q +2000. “Also find the maximum prof Solution: We have, Profit, P = R(q)-C(q) = (10007-292)-(y? —594? +1315q +2000) =-q' +579? -315q—2000 First order condition: ae = dq 224 9 45142 ~315q—2000)=-3¢? +1149 315 dq dq’, Now 2? =9 5-39? +114g-315=0 dq => q? -38q+105=0 = (q-3)(¢-35)=0 <4 =3 or, g=35 4 : jee Second order condition: 4? = (39? 44 14q~315)=~6q+114 dq’ dq ae v dq Hence the profit maximizing output is given by q=35. [Ans.] Maximum profit = -(35)’ + 57x(35)" -315x35— 2000 = 42875 + 69825-11025 2000 = 7k:13925 [Ans.] =-6x3+114=96>0, eas = -6X35 +114 =-96 <0Differentiation and use In Business Problems | 485 groblem-10: A manufacturer produces’ x sets radio por week at a (otal cost of Tk. (2+ 78x+2500), He is 4 Monopolist and the demand function for his product i 00 ee when the price is Tk. p per sei. show that maximum net revenue ic., profit is ebiained when 29 sets are produced per week, What is the monopoly price? solution: Total cost (7C) = x? + 78x 42500 dca Marginal Cost (MC) = = Zl + 78x + 2500)= 24-478 600- Demand funetion is x= =P — 8x = 600— p= p= 600-8x Now total revenue for x sets, R= pxx= (600- 8x)x= 600x—8x? dR Marginal revenue (MR) = 7 a (600% - -8x*) = 600-16 Net revenue will be maximumat i level of output, where MR = MC. #284 78= 600-163 = 18%-=600-78=522= x=57 =29 Hence in order to maximize his profit, the manufacturer should manufacture 29 sets radio per week, Also the monopoly price is given by p = 600-8x = 600-8x29 = 7k.368. [Ans.] Problem-11: The total revenue’ function of a firm is given as R= 21q—q?and its total cost function as C i —3q’ -7¢q+16 , where q is the output. Find (i) the output at which the total revenue is maximum, and (ii) the output at which the total cost is minimum. Solution: () R= 21q—-q? : 7 Differentiating R w.r. to q, we have dR AR 1g_-g)a21- tg age! @)=21-2q 21 Put RR 9-21-2920 9= dq ‘maximization. =10.5 is the necessary condition. for revenue 2 R_d : To get the sufficient condition, we have a on (21-2g)=~2, a negative quantity, which . iq Means the revenue is maximum at q=10.5 [Ans.]486 || Business Mathematica (i) C= Lag! 79416 ; Differentiating C. war. to q, we have Os =the -3q° ~14 416) = xq! 3924-124 -69~7 aq dg\3 : Now put 202 4" ~6y-1=0 (y- Tat) dq the necessary condition for cost maximization or minimization, But q = =1 is‘not adihissible as output cannot be negative. “G57 or, To get the sufficient condition, we have “ = £0 -6y~-7)=2q-6 gd = 2x7-6=8, a positive quantity which means that cost is minimum at q=7. (Ans, ag 1 Problem-12: The demand function of a consumer good is x=—(25-2p), where x is the number of units and p is the price. Tlie average cost per unit is’Tk. 40. Find: (a) the revenue function R ip terms of price Pp (b) the cost function C, (c) the profit function P, (d) the price per unit that maximizes the profit function, and (e) the maximum profit. Solution: (a) R(p)= xp = $(25-2)p=1(259-2p") (b) C(p)=40x= 40x35 (25-27)=2a5~2p) (©) P(p)= R(p)-C(p) : 1 > 4) 40 25p_2p* 1000, 80p * ==(25p-2p’)-(25-2p) = 22 2P” _ 1000 |, 80p. 3 25p-2p")-( ~2p) = SPE oo #105 p-1000).....-.(4) aso ghar" +105p> 1000) =2(- (-4p+105) dP Solving the equation — = 0, we have dp . $-4p+105)=0= 4p =105> p=“ = 26.25Differentiation and use in Business Problems ||487 lp : using second derivative test, we have 2? day +105)= . dp* 3dp Maximum profitis found when p= 26.25 (Ans. (@) Maximum profit is [by the help of (1)} P(p) st 2(26.25)' +105(26.25)—1000 26.04 [Ans.| Porblem-13: The demand function faced by a firm is p=500-0.2x and its cost function is x+10,000 where p = price, X= output and C = cost. Find the output at which the profit ofthe firm is maximum. Also find the price it will charge. Solution: Revenue, R(x)= pxx = x(500- 0.2x) = 500x—0.2x? Profi evenue-Cost + P(x) = R(x)- C(x) = 500x- 0.2%? — (25x + 10,000) = 475x-10,000-0.2x7 For maximum or minimum: dP . a (475% -10,000 ~0.2x?)= 415~0.2x2x= 475 -0.4x Put <9 = 475-04r=0..25 475 <118750 . dx Oa 2 Also: eee “(a7s-0 4x)=-0.4<0, de dx Hence the profit is maximum when the output, x = 1187.50 Atthis level, the price is given by p = 500—0.2x=500—0.2(1187.50)= 262.50 [Ans.] Problem-14: ABC Co. Ltd. is planning to market a new model of shaving razor. Rather than the set, the selling price of the razor based onily on production’cost estimates, management polls the Tetailers of the razors to see how many razors they would buy for various prices. From this survey, it is determined that the unit demand function (the relationship between the amount x ach retailer would buy and the price p he is willing to pay) is x=-1500p +30,000 : The fixed costs to the company for production of the razors are found to be Tk. 28,000 and the 60st for material and labor to produce each razor is estimated to be Tk. 8.00 per unit. What price should the company charge the retailers in orders to obtain a maximum profit? : Solution: ‘Let x denotes the number of unit produced, C denotes the cost of production to the Company, and p denotes the price per unit (in Taka). Then the cost C is given by and the unit demand is Substituting, we find that the cost function C (x) in terms 1500 p +30,000 f the price p per unit is488 || Business Mathematics C(p)=8x(—1500p +30,000)+ 28,000 = 12,000p + 2,68,000. The money derived from the sales of the shaving razors as a function of the price p per unit i the Product of the number sold by the price per unit, ic., the revenue function R(x) isR = (~1500p + 30,000)xp =-15,00p’ + 30,000p. The profit P to the company is the difference between revenue (money derived from sales) ang total cost, i.e., the profit function is: R-C (- 1500p +30,000p)~(12,000p + 2,68,000) =-1500p* +42,000p — 2,68,000. The derivative of P(x) is: e = P'(p)=-3000p +42000. P Solving the equation, P'(p)=0, we have ~ 3000 p+ 42000 =0=> p=14. : Using second derivative test; we have = £e 3000 p+42000)=~3000 <0 a ip ~’:Profit is Maximum when p =14. The profit for this price is p =—1,500(14)° +42,000x14—2,68,000 = Tk.26,000. The number of units sold at this price p is x =(—1500)(14)+ 30,000 =9,000. [Ans:] Problem-15: A company making a single product has manufacturing and distribution divisions. Stock of finished goods is not held, all production being to order. The average net revenue pet unit allowing for quantity discounts is Tk. (100-0.01q) where q is the quantity sold. The average variable costs per unit for the’two divisions are: Manufacturing = 10+0.015¢ Distribution = 2+0.001g. The fixed costs per annual are: Manufacturing = Tk.40,000 Distribution = Tk.20,000 CALCULATE: . (a) the optimum annual production quantity to maximize the profit of the company, (b) the profit of the company at the level of activity in (a) above, (c) the annual production qyantity to maximize the manufacturing division's profit if it has been instructed to transfer the product to the distribution division at Tk. 73 per uni (d) _ the profit of the company, showing the results of the two divisions at the level of activity if (c) above.Ditforentiation and use in Business Problems || 489 (a) Profit = Revenue - Cost = Revenue ~ (Variable costs + Fixed costs) ) (10 +.0.0154)— 4(2+0.001q)-(40,000-+ 20,000) 2 P=88q-0.026q" — 60,000. formaximization, we have dP d aaa iq 884-0.0264" -60,000)=88-0.052q aP ow qo? 88-0.052q=0 => ¢ =1692 units. a@P_d dq Profit maximization output, q = 1692 units. (b) When q=1692, Profit = 88(1692) — 0.026(1692)’ - 60,000 = Tk.14,461.54 (© Ifthe manufacturing division is to transfer out at Tk. 73 per unit, we can express their profit as Profit =73x(Production quantity) — Manufacturing variable costs — Manufacturing fixed costs ' «P= 73q—q(10 + 0.015q)- 40,000 = P=63q-0.015q? — 40,000. (88-0.052q)=~0.052<0 For maximization, ap_d @ = * (63q-0.015q? — 40,000) = 630.03 7 “al 4g — 0.015q )= 63 g vow F = 0 = 63-00089=0=9 q=2100 units q dp? _d Also <= (63 =0.03g)=-0:03< 0. FF aa q) +. Annual production quantity, q = 2100 units. (@ - Company profit (part ‘a") = 88q -0.026q" ~ 60,000. If g=2100, Profit = 88(2100)-0.026(2100)* - 60,009 = 7k.10,140. Manufacturing Profit (part ‘c’) = 63q —0.015q* - 40,000 If q=2100, Profit = 63(2100)-0.01 5(2100)' - 40,000 = Tk.26,150. Distribution profit = Revenue — Transfer cost and Department cost 7 = q(100-0.01g)- {734 + g(2+0.00 1q)+20,000} 00g —- 0.019” -739 —2q-0.001q" - 20,000 =-0.011q? +25q- 20,000490 ||Business Mathematics If q= 2100, Profit = -0.011(2100)? + 25(2,100)- 20,000 = -Tk. 16,010. ‘This shows thit there is a loss of Tk. 16,010 from the distribution unit. {Ans.} Problem-16: The production function of a commodity is given by oo Q=40K 436 -4 Where Q is the total output and F is the units of input. (i) Find the number of units of input required to give maximum output. (ii) Find the maximum value of marginal product. (iii) Verify that when the average product is maximum, it is equal to marginal product, Oe ood ‘Fe Solution: (i) = =—] 40F +3F? -— ]=40+6F — ion: (i) OF < +3. 5 } Cael ' de For maximum or minimum (First order condition): 2 =0 40+6F - = (F-10)(F +4)=0 = F=100r F=-4 “But, F = —4is not admissible as input cannot be negative. Hence, F = 10. 2 . Now £@ = | (o+6r = F*)=6-2F (second order condition) dF? dF > a’Q Fils =6-2x10=-14<0. Hence output is maximum when 4 units of input are used. (ii) Marginal Product MP = a =40+6F - F? For maximum or minimum: a(MP) =0 dF Now MP) _ 4 (49466 —F2)=6-2F .6-2F =0= f =2=3 dF dF : 2 2 Also AMP) (6-2F)=-2<0. dF? dF Hence value of marginal product is maximum when input is 3 units. Value of marginal product = 40+ 6x3—37 = 49 units. : 4or+3F?-1p rt (iii) Average product (AP)== Fas F d(AP) . dl . For maximum or minimum: 3Differentiation and use In Business Problems| 491 yow yo HAF) average product is maximum when F= 4,5 2 average product (when F = 4.5) = 4043x4.5- (45) z] Marginal product (when AP is maximum, ie., F=4.5)=40+27-S! = 187 _ 46,75 [Proved] . 4.4 46.75 problem-17: The total cost function of a firm is C =+x° 5x" + 28x-+ 10, where’ is total 3 cost and x is output. A tax at the rate of Tk. 2 per unit of output is imposed and the producer adds itt his cost. If the market demand function is given by p= 2530— 5x, where Tk. p is the price perunit of output, find the profit maximizing output and price. : Solution: Total revenue function, TR = (2530 —5x)x x = 2530x— 5x" ‘After imposition of a tax of Tk. 2 per unit, TC 5x? +28x4+10+ 2x —5x° +30x+10 Now Profit, P = TR-TC = (2530x—5zx* \-(; x0 = 5x2 4300+ 10) : For maximization, 2° = “| (2530x~- 5x) - (3 xP -5x2 43004 10) de dx 3 =2 = (2530 10x) - (x? -10x +30) =—x" +2500 i Now 2 a0 -s" +2500 =0= x? =2500 => x= +50 x But x =—50 is not admissible as output can not be negative. .. x= 50. Now 4P . 4 (_ 52 4.2500)=-2x=-2x50=-100<0. ae de <.Profit maximizing output is 50 units. «When x= 50, price p = 2530-5x50=Tk.2280.492 || Business Mathomatica Probl 18: Suppose the demand and total cost functions of @ monopolist are P= 20-dxand TC = 4x-+2 respectively where p is price and x is quantity. If the Bovernmen imposes tax at the rate of 20% of sales, determine the total tax revenue that the government wit, be able to collect Solution: Given p= 20-4xand TC =4x+2 +: Total Revenue = 7R = px = (equal sign) (20-4x)x = 20x = 4x" Tax = 20% of TR = 20%XTR = 3(20s -43?) Total new cost = TC + Tax = 4x +2 + £00" -4x7) Sart2t art a-gs? 48142 Now, profit P = Total Revenue ~ Total new cost : = Q0r-4e)-(-$s" +8042] aS es iar-2 ped 6x2 195-9 aa . de del 5 3 Now ” 20-8. =2 ») After TAX, ca 4x+0.5x = 4.50x MC= St 50x)= 4, ihe optimum ce MC=MR => 20-8x=4.5,ie.,. sed =1.94 «Price, p= 20-4x1.94 Sreiaas .) Tax revenue is maximum where MR = MC (after tax t) 5 20-8x= 441 => x= lO=t few price after tax is, ‘profit (p) = 20—- (= hus, profit after tax is: Profit (P)=7R -TC = (20x—4x7)- (4x+0x)= x(16-4x-1) vbstiuting x= 2°=!, we obtain 2 oft = 29=*[ 16-7 4x16 (16 -1) a 16 . 2 crevenue, T= tx = ESE 8 OF will be maximum where 4 =Oand —<0 It de aT d(16r=0?)_ at d\ 8 @T _d(16-2t)__2__1eo =-55-9 \gain SS dak 8 erefore, tax is maximum when t =8. With sales tax of 10% the net TRis:TR= 0.90(20- ‘dx)x=0.90 (20x - 4x?)494 ||Business Mathematics -. MR =0,90(20-8x) At optimum level, MR = MC /.0.90(20-8x)=4= x= ” =1.94 [Ans.] Problem-20: From past experience and estimation for the future, XYZ. Company has decided thy the cost of production of their sold product from an advanced process machine is: C=10644+5x+0.04x7 where C denotes total cost in Tk. and x denotes quantity produced and sold. The marketing department has estimated that the prite of the product is related to the quantity produced and sold by the equation: , p=157-3x, where p represents price per unit in Tk. The government has proposed a tax of Tk. ¢ per unit product but it is not expected that this will have any effect on the costs incurred in making p or on the demand price relationship. Find: (a) the price and quantity that will maximize profit when there is no tax. (b) the price and quantity that will maximize profit if the proposed tax is introduced. (c) how much of the tax t per unit is passed on to the cdstomer. (d) the effect on the profit of the company if tis fixed at Tk. 4 per unit. Solution: (a) Profit (7) =Revenue(R)-Cost(C) Here Revenue (R)= Price(P)xQuantity(x) = (157--3x)x =157x-3x7 ‘ Cost(C) = 1064 + 5x +0.04x? c= 157x~3x" — (1064 +5x+0.04x") * =152x-3.04x° - 1064 Differentiating 1 w. r. to x, we have at _ 4 (159x~3,04x7 -1064)=152-6.08x dx dx’ Now 2 =0 => 152-6.08x=0 dx» > zeiv = 25 units 6.08 FP oe .". Profit is maximum when 25 units are produced. Now p=157-3X25 =Tk.82 per unit and w=152X25-3.04x(25)° -1064 = 7.836 [Ans.] (pb) Whena tax (1) is introduced, 7 = R-C becomes: = 4 (152-6.08x)=-6.08 <0 deDifferentiation and use in Business Problems| 495 = (157 -3x)x— (1064 +5x40,04%? +12) =152x- 3.047 - 1064 ~tx pierentating % with respect to x, we have 2 152-6.08x~1 ds koe AF 20> 152-6.08x-1=0 > y= 15271 de 6.08 &x_ 4 952-6.08x-1)=-6.08 <0 ea For maximum profit, quantity (x)=—2* — 1 = 95-1 _ units substituting for x in the price equation, we have t 3 3t 7 2157-3) 25-—— |=157-75+—— =824—— p=l5 ( a 15+ Fog = 82+ Zoq lms (©) The amount of tax passed on the customer is gna 49.34 Yo (approximately) (@ When the tax per unit is Tk. 4, then t= 4. 4 = 25-—— = 24,34 = 24 (i its). x Soa 23 Cin whole units Now = 152x-3.04x? -1064-1x =152x24~—3.04x (24) -1064-4x24 = 7k.736.96 ‘The profit without tax in (a) above = Tk.836 Profit with tax of Tk. 4 = 7k.736.96 “Difference to profit = Tk.(836 - 736.96) = Tk.99.04 Problem-21: A monopolist’s total cost is TC = ax’ +bx+c and the demand function is p=f—ax, where x and p denoté the units of output and price respectively and 4,b,c,aandB are positive constants. If the government imposes tax at the rate of ¢ per unit of, output, show that the total iax is maximum when t= (8—b)/2. ‘ Solution: After the imposition of tax t per unit, the total cost function TC is given by TC sax +bx+ct+m% Revenue function, R= px= (B-ax)x= Bx-ax? “Profit function, P= RC = (Bx-a@x?)-ax* +bx-+e +12)496 || Business Mathematics For Pto be maximum, 2° =9 ‘i : ae og lioe | (ax’ 2 oxtc+tx)}= B-20x-2ax-b-t constants. Therefore, the level of output that maximizes the profit is —A-b-t 2(a+a) The total tax revenue for this level of output is T = = 7 1 aT For T to be maximum, First order condition: sy bt-bt-0 | p-b-2 : F aa 2Aa+a) J 2(a@+a) aT B-b-2t 1 Now —-=0 =0 -b-2t=0>1t-(B-b jow = 0=> sara) =p > 38 ) °T _ d-{ B-b-2 1 : : ii ——};=-— <9, since a and a are positive constants. de dx Yaa) | “(e+a) Hence the tax rate t that maximizes the total tax revenue is t= 3- 6). [Proved] Problem-22: There are two Duopolists manufacturing equal and identical bicycles. The total cost 2 : of an output of x bicycles per month is Tk. (5 +3x+ 100 in each case. When the price is Tk p per bicycle the market demand is x=75-3p bicycle per month. Find the total equilibrium output per month. Solution: Let x, and x, denote the output per week of the two duopolists. Then x = x, +x, is the total output. (x +x) Demand function: x= 75-3p > 3p=75-x=> pH25-3=25- 5 Net revenue for the first firmDitforentlation and use in Business Problems| 497 - H+ «1 a For maximum net revenue, —— = 0 = =22-5! Md xy ds, 3 ae pr Bt=0>0=22-28 dx, 3300" similarly, we can show for the second firm: 56x, x 0=22-7 2-4 : 43) The equilibrium outputs of the two firms in duopoly are the simultaneous solutions of (1) and (2). ‘They are: y = 5150 _ . “351 ‘i : ie, x) =x, = 20.37 (approx) «Total output per week is 220.37 = 41 (approx), [Ans.] ‘ Problem-23: The tdtal Gost C forvutput xis givenby C= F048. Find: (i) Cost when output is 4 units. (i) Average cost when output is 10 units. (ii) Marginal cost when output is 3 units. Solution: (i) Given cept 2 ; 2. ,,35 ‘Cost for Aunit ouputs= =x4 + =Tk.20.16 4 (i) Cost for 10 amits output =3x10+3 M5 = 424.16 ac=45, 1. 29 9.45 cee (i) Moa 2,438) -2 2 5140=7K0.67 [Ans.] dx\3 az Problem-24: The average cost function (AC) for a commodity is given by AC =x-+ 5428 in (erms of the output x. Find the outputs for which ACis increasing and the outputs for ditt ~65“ee || Pusiness Mathematics ACis decreasing, with increasing output. Also, find the total cost C and the marginal cost (Mc) as function of x. 36 36 Solution: Slope of AC =—— ! (Ac)= x+54+—]=1-= dx a x 7 x >0 => x7 -36 >0 > x? >36.4.x36 =x'+5x436 +. Total cost, TC = xx AC = xx (x? +5x+36) ea dC_d si Marginal Cost, (MC) = +5x+36)=2x+5. [Ans] Problem-25: The total cost function of a firm is given by C =0.04q° -0.9q? +109 +10 Find (a) Average cost (AC) . (b) Marginal cost (MC) (©) Slope of AC. (d) Slope of MC. (©) Value of q at which average variable cost is minimum. Solution: Given C= 0.04g? -0.9q? +10q+10 C _0.04g° -0.94? +10g+10 _ (a) AC= =0.04q? -0.99+10+12 _ q q (b) Marginal cost (uc)=$= 4 (0 04q? -0.9¢? +10q-+10)= 0.124? —1.89410 dq (6 Slope of AC=-4(ac)=# 0.04? -0.9q+10 +12 =0.08q-0.9-10 dq qq\., a q (d) Slope of mc=“(mc)= “0.1292 -1.8q+10)=0.24qg-18 dq dq (©) When AVC is minimum, the slope of AVC curve is zero, i.e., Z(ave)= 0 iq “Total Cost, C =0.04q° -0.9q?+10q+10 Here Variable cost =0.04q" -0.9q° +104, Fixed Cost = 10.Differentiation and use in Business Problems ||499 in_ Variable Cost 0.049 ~0,9¢7 gecfte, AVC = RRS = OOH = 0.94" +104 «9 0447 -0.99 +10. q 9 0.089-0.9=0=> g=——=11, sow 0.089 4= Dog 7125 # (ave)=<(0.08q-0.9)=0.08>0 iy Z. dq prerefore, when q = 11.25, average variable cost is minimum. [Ans.] problem-26: The cost function of a firm is: C=300x —10x? +50, where C stands for and x for output. i Calculate (i) Output at which marginal cost is minimum. (i Out put at which average cost is minimum, (i) Out put at which average cost is equal to marginal cost. solution: (i) C = 300% 10x? + 5° ame =26.24 Cre dk Differentiating MC w.r. to x, we have AC) 00—205427 (2005-103 +42) -200-10x20+ bar = 300-20x+ x? Now MOC) 9 = 204 25-0 x=10 is’the necessary condition for marginal cost niinimization. To get the sufficient condition, we have @(uc)* a on eee a eae Patan A (~20-+2x)=2, a positive quantity Which means that marginal cost is minimum 7 Ms ax=10, For 10 units output, MC is minimum. [Ans.] : 1 : 300%-10x7 +53 {ll Average Cost (AC)== = =300-10x+, re x Now to find the output at which average cost is minimum, we have to differentiate the AC w.r. to500 || Business Mathematics a(Ac) di 1 1 24 ae =| 300-10x+=2? }=0-104 4 xan 2-104 2, a ral Oxy } 0 10+ ox2x 3* MAC) 0-5-1041 428-0 242105 7220-5, dx 3 3 2 aa Also (ac) & -10+ > a positive quantity, ae dx ~, Second condition is also satisfied. Hence the output at which AC is minimum is given by x =15.[Ans.] (ii) Given AC=MC , =p = 300- 10x44 =300- 202+? 22 = 10r 2 = Fy -10:=02 (2 10)20-94-0,0=15 But x=Ois not acceptable output. - Henge for x =15, Average cost is equal to marginal cost. [Ans] Problem-27: The total monthly variable cost of x ton output by a fiem Producing metal is Tk ae ~3x? +5x and the fixed'cost is Tk. 300 per month. Find the output for minimum average cost. = Solution: Total Cost (1C)=Total Variable Cost (TVC)+ Fixed Cost (FC) ATC = 33" 4504300 TO ty -3x2+5x+300 AC = Average cost === = 10s Bon Bre ooe 10 ‘ nw #UC), Af dx dx\10" 2° = 15x" - 1500 _ Sx? $lAc)=0 4 2-3-3095 0 -e = x*-15y? -1500=0=> x=19.10 - d(AC)_d (1 *) 120 1, . oleae ett so =19.1 Again at o (tx YJ SS" Gotop Ors Hence average cost is minimum when thé output is 19.1 tons [Ans.]Differentiation and use in Business Problems||501 oblem-28: If the demand function of the monopolist is 3q=98—4p and average cost is gf 2ewhere lution: Given Average Cost (AC) =3942 -qotal Cost (TC)= ACxq 2 TC =(39+2)xq y = TC =39? +29 Marginal Cost (MC) = sere) di, : oMc= 54 +2q) => MC=6q+2 fere 3q = 98-4 p 4 4p =98-3¢ Spe a =28_34 Cor wr Ve know, Total Revenue (TR)= pricex quantity 5 TR = pXxq = m-(3-22)xq 4.4 2 > TR = 284_ 34° 4. 4 -M arginal Revenue(MR)= cr) aq 2 98 6q 3a. MR=—-°4 ) > 4.4 der monopoly business, profit will be maximum at MC = MR. ‘MC=MR 6942-28 _ 64 = 6qt2= 4 98-64 4 2249 +8=98-64 = 30g=90 => q=3 Othe maximum profit of the monopolist will be obtained gt q=3. hen q=3, then quired maximum profit (y)=7R-TC {989 3g?) 1. (8t-22) 20) 989 _34° 3g? 99 =980)_ 360) _ 404 4 4 is output and p is the price, find maximum profit of the monopolist. 3(3) -2(3)Ditforentiation afd use in Business Problems||611 90, Investigate the ima and minima of the function 2.x° + 3x? — 36x +10. ind the extreme values of the function x*e~*, ind the maxima and minima of the functions: Dado ZN HS OER, Cb) xt 4 20 3et ave, 23. Find the maximum and minimum values of the function (x - 2)'(x~3)°. S osyt rn 24, (a) Show that_ x" —Sx"4+5x"—1, has neither a maximum value when x=1, minimum value when x and point of inflexion when x =0. ; a 22 ‘ n ini : (b) Show that x" —3x" +3x+7 has neither a maximum nor a minimum value. 25. Find the maximum and the minimum values of the function x* — 5x*-+5x° —1. Discuss its nature at x =0, R State whether y = x° — 6x +13 has a maximum or a minimum value. Find the value. RB . For a unit demand function of p= 24—-8x where x is the number of units and p is the price in Taka, find the sales function. Ifthe average cost per unit is Tk. 8, find a. The profit function. b. The number of units that maximize the profit function. 28. If the total cost function of a firm is C =i +30x+10, where C is the total cost and x is the output, and price under perfect competition is given as Tk. 6. Find for what value of x the profit will be maximized. Examine both first and second order conditions. —* ha 29. If the demand function for 4 commodity is given by p=12e¢* where p is the price per unit and q is the number of units demanded. Determine the price and the quantity for which the revenue is maximum. 30. State the conditions for a maximum profit, Find the profit maximizing output level if p=200-10x and ‘AC =104=. 31. A firm produced an output of x tons of a certain product at a total cost given by C=x°-4x?+7x. Find the output at which the average cost is the least and the corresponding value of the average cost. What is the total cost at this level?512 || Business Mathematica on is} . = 35. 37. 3 39. + Suppose the'cost function is given by C(x)= x? +5 and the price function is P + Ifthe cost function is C(x) =4.¢-+9 and the revenue function is R(x) = 9.x ~ x?, where x iy the number of units. produced, R and C are measured in ‘Taka, find the maximum Profit, = 12-25 Where p is the price in rupees and x is the number of units produced. Find the maximum profit, + A company has produced x items for which the total cost is C and the total Fevenue R given by equation: R= 3x and C=100+0.015x7. Find how many items should be Produced tg maximize the profit, What is this profit? A sofa — set manufacturer can manufacture x sofa sets per week at a total cost of hh ly (58 +ar+100}, How many set per week should be manufactured for maximum monopoly revenue when the demand law of his product is x =10/25—p set Per week, Also. find the net revenue with this output, The cost function C(x) for producing x units of a commodity is given by C (x)= oe = 5x7 +75x +10 At what level of output the marginal cost attain its minimum? What is the marginal cost at this level of production. If q the number of workers employed, ‘the average cost of production is given 3 byC=—3 4049, 2(q-4) Shows that q=4: ‘5 will make the expression minimum, In the interest of the management, will you then advise to employ four or five worker? Give reasons for your answer. . The following expressions define a firm's total revenue and total cost functions: Total revenue= 18x — x? +24 1 Total cost = = x? -2.5x° +50 2 a. Use calculus methods to find optimum production level, = b. State the fitm’s profits at the optimum production level. A tractor company can manufacture at most 1,000 heavy — duty tractors per year. Also, from Past demand data, the company knows that the number of heavy — duty tractors it can sl. Ditferontiation and une In Business Problems|) 619 ends only on the pric depe the price p of each unit, The company also knows that the cont to produce the units is 4 function of the p=29,000-3y Humber of units x sald. Assuine that the price function 3 and the cost function C= 2,00,0000-4 20,000. 4-54) How many unit should be produced to maximize profit? 40, A manufacturer estimates that he ean sell $00 articles per week if his unit price is Tk. 20.00 and that his weekly sa Ss Will rise by 50 units with each Tk. 0.50 reduction in price. The cost of producing and selling x articles a week is C(x) = 620046.10. + 0.0003." Find a. The price function b. The level of weekly production for maximum profit. ec. The price per article at the maximum level of production. 4. A tucking company has an average engine overhaul cost of Tk. 1,000 and routine maintenance cost (in Taka) of. C= 0.40x +107 x7, where x is the interval in kiloreters between engine overhauls. a. Show that the total engine maintenance cost Tk. (per km) is given by 1000 0:04 +100" x b. Find the rate of change of the total maintenance cost with respect to the engine overhaul to interval ae dx 42. Given p= 20-g,C =2+8q+q". Where p=price, q = output, R =.revenue, M = profit. Find: (a) q which maximize profit and corresponding values of p, R and M. (b) q which maximizes sales (total revenue) and corresponding values of p. R and M (©) 4 which maximizes sales subject to the constraint M<8 and cosresponding values of p, R and M. 43. A monopolist has the following demand and cost functions. p=30-q : ‘ C=160+8q ‘The Government levies a tax at the rate of 2 per, unit sold. Find profit maximizing price and quantity after tax levy. 44, A firm has the following functions: p=100-0.01g 1 =50q+30,000 -67514 ||Business Mathematics (AS. 46. 47, ‘A tax of Tk. 10 per unit is levied: What will be the profit ~ maximizing price and quantity before the tax and after the tax:? Which does the monopolist find it better to increase th price by less than the increase in tax? If the relevant position of the demand function is p=100-0.01q, when q is week production and p is weekly price and cost function is c= 50q+ 30,000. a. Find.maximum profit, output, price, and total profit. b. Suppose government decides to levy a tax of Tk. 10 per unit of product sold, what wil happen to price, quantity sold and total profit. Given the demand function p=(10—x)? and the cost function G = 55x~ 8x". Find th maximum profit. What would-be the effect of an imposition of a tax of Tk. 9 per unit quantity on price? The demand and cost functions of a firm are given by q=10,000-100p and c= 59q+30,000. where q =quantity demanded, p = price/unit, ¢ =total cost a. Determine the optimum level of q that the firm should sell. b. Assuming that the above firm has to pay a sales tax at the rate of Tk. 10 per unit, find ou the optimum sales.