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Ms6404 Assignment 3 Answer

This document contains a student's answers to two optimization questions for their Managerial Economics assignment. In the first question, the student calculates (1) the profit-maximizing output level of 40,000 boxes for a storage container company, and (2) the company's optimal profit of $320,000 and return on sales of 16%. In the second question, the student determines (1) the output level of 14 units that maximizes total profit for a firm, and (2) the maximum profit of $171.33 that the firm can earn.

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SamJabry
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152 views

Ms6404 Assignment 3 Answer

This document contains a student's answers to two optimization questions for their Managerial Economics assignment. In the first question, the student calculates (1) the profit-maximizing output level of 40,000 boxes for a storage container company, and (2) the company's optimal profit of $320,000 and return on sales of 16%. In the second question, the student determines (1) the output level of 14 units that maximizes total profit for a firm, and (2) the maximum profit of $171.33 that the firm can earn.

Uploaded by

SamJabry
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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MS 6404 Managerial Economics

Student ID :

5772006

Student Name: Ausara Saelim

Assignment 3
Part 1: Calculus exercises
Find the derivative (dY/dX) of the following functions:
1. Y=8X4 20X3
Answer:

dY/dX

32X3 60X2

dY/dX

3X2 16X + 57

dY/dX

8X4 20X3

32X3 60X2

3X3-2

3X

(2X3 + 3)2

(2X3)2 + 2(2X3) (3) + (3)2

4X6 + 12X3 + 9

dY/dX

24X5 + 36X2

(2X3)2 + 2(2X3) (5) + (5)2

2. Y=X3-8X2+57X+2
Answer:
3. Y=4X3(2X- 5 )
Answer:

4. Y=3X3 / X2
Answer:

dY/dX

5. Y=U2 and U = 2X3+3


Answer:

6. Y=(2X3+5)2
Answer:

dY/dX

4X6 + 20X3 + 25

24X5 + 60X2

Part 2: Optimization Questions


1. Quilted Products, Ltd., offers mail-order storage containers for fine china to newlyweds. The
company is the low-cost provider of these quilted boxes with fixed costs of $480,000 per year, plus
variable costs of $30 for each box. Annual demand relations for the company are:
P= $70 - $0.0005Q
(Hint: Please calculate the TR by taking P x Q = TR = ($70 - $0.0005Q) Q = $70Q 0.0005Q2
a. Calculate the profit-maximizing activity level.
Answer:

$70 - $0.0005Q

TR

PxQ

(70 0.0005Q) Q

70Q 0.0005Q2

TC

480,000 + 30Q

Profit

TR TC

70Q 0.0005Q2 480,000 30Q

-0.0005Q2 + 40Q 480,000

Define Profit = Y

dY/dQ =

-0.001Q + 40

Set derivation= 0

-0.001Q + 40

40/0.001

40,000

The Profit-maximizing activity level is 40,000 boxes.


b. Calculate the company's optimal profit and return-on-sales levels. (Hint: Return on sales is
profit divided by total revenue.)
Answer: The companys optimal profit =

-0.0005Q2 + 40Q 480,000

-0.0005(40,000)2 + 40(40,000) 480,000

320,000

The companys optimal profit is $320,000.


TR

70(40,000) 0.0005(40,000)2

2,000,000

Ruturn on sale = profit/TR

320,000/2,000,000

0.16

The companys return-on-sale level is 16%.


2. Given the following total revenue and total cost functions of a firm:
TR=22Q-0.5Q2 ;
TC=(1/3)Q3-8.5Q2+50Q+90
a. Determine the level of output at which the firm maximizes it total profit. (Hint: Calculate the
MR and MC function. Let MC = MR)
Answer:

MR

dTR/dQ

22 Q

MC

dTC/dQ

Q2 17Q + 50

MC

MR

22 Q =

Q2 17Q + 50

Q2 16Q + 28

MR MC

Q2 16Q +28

Q = 14 and Q = 2
Maximize profit

dY/dQ =

2Q 16

2(14) 16

-12

2(2) 16

12

The level of output at which the firm maximizes it total profit is at 14.
b. Determine the maximum profit that the firm could earn.
Answer:

Profit

TR TC

22(14) 0.5(14)2 (1/3)(14)3 + 8.5(14)2 50(14) 90

308 98 914.667 + 1666 700 90

171.333

The maximum profit that the firm could earn is $171.333.

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