A171 QUESTION FOUR b) (10 MARKS)

b
i.
x 2⋅e x dx
∫ (5
)
marks)

u=x 2 dv=e x
du=2xdx v=∫ e x dv= e x +c 1
∫ x 2⋅e x dx= x 2⋅e x−∫ e x⋅2 xdx ∫ xex dx
=x 2⋅e x −2∫ xe x dx u=x
du=dx ;

=x 2⋅e x −2 ( x⋅e x −∫ e x dx ) dv=e x

v=∫ e x dv=e x +c 2

=x 2⋅e x −2 ( x⋅e x−e x ) +c

=x 2⋅e x −2 x⋅e x−2 e x +c

ii. If net investment (millions of RM per year) is non-constant flows,

2
3
I(t )=5 t , what will be the capital formation during the interval [0,5]
and the time path of capital stock, K (t), given K(0)=25? (5
marks)
2
5 3 K (t )=K (0 )+∫ I⋅dt
∫0 5 t dt=K (t )] 50
2
2 3
5 3
=25+∫ 5 t dt
=K (0 )+∫0 5 t dt 2
3
¿ 25+5∫ t dt
5
5
=25+3t 3|50
()
3
t
¿ 25+5
5
=25+(43 . 86−0) 3
=68 .86 5

=25+3 t 3

The capital formation during the interval [0,5] is 68.86.

5

While the time path of capital stock, K (t )=3 t 3 +25

1
A171 QUESTION SIX (30 MARKS)
a) A firm is a monopolistic producer of two goods. The prices are related to
quantities Q 1and Q 2 according to the demand functions P1=50−Q 1 and
P2=95−3 Q2. If the total cost function is TC=Q21 +3 Q 1 Q 2 +Q 22.
i. Find the firm’s total revenue function. (3
marks)
T R1 =P 1( Q1) T R2 =P 2 (Q2)
¿(50−Q 1)Q 1 ¿( 95−3 Q 2 )Q 2
¿ 50 Q 1−Q 21 ¿ 95 Q 2−3 Q22

TR=T R1 +T R2
¿ 50 Q1−Q21 +95 Q2−3 Q22
ii. Find the firm’s total profit function. (3 marks)
π=TR−TC
π=( 50Q1 −Q21+ 95 Q2−3 Q22 )−(Q21+ 3Q 1 Q2 +Q22)

¿ 50 Q 1−Q 21 +95 Q 2−3 Q 22−Q 21−3 Q1 Q 2−Q 22

¿ 50 Q1−2 Q21+ 95Q 2−4 Q22 −3Q 1 Q 2
iii. Calculate the value of values of Q 1and Q 2 which maximize profit.
π=50 Q1−2 Q21 +95 Q2−4 Q22−3 Q1 Q2 (5 marks)
∂π ∂π
π 1= =0 π 2= =0
∂ Q1 ∂ Q2
∂π ∂π
=50−4 Q1−3 Q2=0 =95−8 Q 2−3 Q 1=0
∂Q 1 ∂Q 2
−4 Q 1−3 Q 2=−50 −3 Q 1−8 Q 2=−95
Ax=b
−4 −3 Q1 = −50
[ ][ ] [ ]
−3 −8 Q2 −95
x= A−1 b
Q1 1 −8 3 −50
[ ][
=
Q2 (−4×−8)−(−3×−3) 3 −4 −95 ][ ][ ]
1 8 −3 50
=
[ ][
−23 −3 4 95 ][ ]
2
 5
=
[]
10
Q́1=5 , Q́2=10
∴ The value of
Q1 is 5 units and Q2 is 10 units which maximize
profits.

iv. Using the second order condition (SOC), prove that the profit level is at
a maximum. (5 marks)
π 11=−4 , π 12=−3
π 21=−3 , π 22=−8
π π
[
H= 11 12
π 21 π 22 ]
[
−4 −3
H=
−3 −8 ]
|H 1|=−4 ¿ 0 |H 2|=|H|

|H|=|−4 −3 |
−3 −8
=23 ¿ 0
The H is negative definite, the profit function is maximum relative.
b
An individual’s utility function is given by U( x 1 , x 2)¿ 2 x1 x 2+3 x 1, where x 1 and
)
x 2denote the number of item of two goods. The prices of the goods are RM1
and RM2, respectively. Assume that the individual has RM83 available to
spend on these goods.

i. Find the budget constraint. (2

marks)

P1 x 1 + P2 x 2=I
x 1+ 2 x 2=83

ii. Find the utility-maximizing value of x 1and x 2 using the Lagrange

Multiplier Method. (7
marks)

3
 U( x 1 , x 2)¿ 2 x1 x 2+3 x 1 s.t x 1+ 2 x 2=83

L( x1 , x 2 , λ )=2 x1 x 2 + 3 x 1 + λ[ 83−(x 1 +2 x 2 )]

=2 x 1 x2 + 3 x 1 + λ[ 83−x 1 −2 x 2 ]

Lx =2 x2 +3− λ
1 =0

Lx =2 x1 −2 λ
2 =0

L λ=83−x1 −2 x 2 =0 Ax=b

0 2 −1 x1

][ ] [ ]
−3

[ 2 0 −2 x 2 = 0
−1 −2 0 λ −83

0 2 −1
|A|=| 2 0 −2 |
−1 −2 0

=0−2(0−2)−1(−4 )

=8

By using Cramer Rule

|A1| |A2| |A |
x 1= x 2= λ= 3
|A| |A| |A|

−3 2 −1 0 −3 −1 0 2 −3
|0 0 −2| | 2 0 −2| |2 0 0 |
−83 −2 0 −1 −83 0 −1 −2 −83
= = =
8 8 8
−3(0−4 )−2(0−166 ) 3(0−2)−1(−166 ) −2(−166−0)−3 (−4 )
= = =
8 8 8
=43 =20 =43

4
 ∴ The utility maximizing values of
x 1 is 43, x 2 is 20 and λ is 43.

iii. Prove that individual’s utility is a maximum by bordered Hessian.

(7 marks)

Lx x =0 Lx x =2
1 1 , 1 2

Lx x =2 Lx x =0
2 1 , 2 2

0 gx gx

[
H́= g x
gx
1

2
Lx x
Lx x
1

2
1

1
Lx x
Lx x
1

2
2

2
]
0 1 2

[ ]
H= 1 0 2
2 2 0

|H 2|=|H|
0 1 2
|H 2|=|1 0 2 |
2 2 0
=0−1(0−4 )+2(2−0)

 8 ¿0

The H is negative definite. The utility function is maximum relative.

A172 QUESTION THREE (25 MARKS)

a) A firm is a perfectly competitive producer and sells good A and good B at
RM100 and RM80, respectively. The total cost of producing these goods is
given by TC=2 Q 2A +2 Q A Q B +Q 2B , where Q A and QB denote the output level of
good A and good B, respectively.
i. Find the firm’s total profit function. (3 marks)

5
 TR=100 Q A +80Q B
π =TR−TC
2 2
π =100 Q A +80 QB −( 2 Q A +2Q A Q B +Q B )

=100 Q A +80 Q B−2Q 2A−2 Q A QB−Q 2B

ii. Calculate the value of Q A and QB which maximize profit. (5

marks)
∂π ∂π
π A= =0 πB= =0
∂Q A ∂Q B
∂π ∂π
=100−4 Q A −2 Q B=0 =80−2Q A −2 Q B =0
∂Q A ∂Q B
−4 Q A−2Q B=−100 −2 Q A−2Q B=−80
Ax=b
−4 −2 Q A = −100
[ ][ ] [ ]
−2 −2 QB −80

x= A−1 b
QA 1 −2 2 −100
[ ]=
QB (−4×−2 )−(−2×−2) 2 −4 −80 [ ][ ]
1
= −2 2 −100
[ ][ ]
4 2 −4 −80
10
= []
30
Q A=10 , QB=30

∴ The value of
Q A is 10 units and QB is 30 units which maximize
profits.
iii. Using the second order condition (SOC), prove that the profit level is at
a maximum. (5 marks)
π AA=−4 , π AB=−2
π BA =−2 , π BB =−2
π π AB
[
H= AA
π BA π BB ]
H=
[ −4 −2
−2 −2 ]
6
 |H 1|=−4 ¿ 0 |H 2|=|H|
−4 −2
|H|=| |
−2 −2
=4 ¿ 0
b) 1 1
2 4
A` firm’s production function us given by Q=10 K L . Unit capital and
labour costs are RM2 and RM2.50 repectively and the firm spends a total of
RM30 on these inputs.
i. Find the units of capital and labour that maximize the firm’s output
using the Lagrange Multiplier Method. (7
marks)
1 1
2 4
Q=10 K L s.t 30=2 K +2 .5 L
1 1
2 4
L( K , L , λ )=10 K L +λ [30−(2 K +2. 5 L)]
1 1
2 4
=10 K L +λ [30−2 K−2 .5 L ]
LK =5 K−0 .5 L0 . 25−2 λ=0 LL =2. 5 K 0 .5 L−0 .75−2 .5 λ=0 L λ=30−2 K −2. 5 L=0
−0.5 0.25 0 .5 −0.75
5K L =2 λ 2.5 K L =2.5 λ
−2 K −2 .5 L=−30
LK −0 .5 0.25
5K L 2 −2K −2 .5( 0.4 K )=−30
= =
0.5 −0 .75 2.5
LL 2.5 K L −3 K=−30
5L
=0.8 K=10
2.5K
5 L=2 K −0 .5 0.25
5(10 )( 4 )=2 λ
L=0.4 K
2. 2361=2 λ
L=0.4(10)
λ=1.118
L=4
The capital, K=10 , labour, L=4 and λ=1.118 that maximize the
firm’s output.
ii. Prove the firm’s output is at its maximum by Bordered Hessian.
(5 marks)
LKK =−2.5 K −1 .5 L0. 25 LKL =1.25 K−0 ..5 L−0 .75
−1.5 0.25 −0..5 −0.75
=−2.5(10 )(4 )=−0.1118 =1.25(10 )(4 )=0.1398
−0 .5 0.25 0 .5 −1. 75
LLK =1.25 K L LLL =−1.875 K L

7
 −0.5 0 .25 0 .5 −1 .75
=1.25(10 )(4 )=0.1398 =−1.875(10 )(4 )=−0.5241
0 gK gL
H́= g K
gL [ LKK
L LK
L KL
L¿ ]
0 2 2.5

[
H= 2 −0.1118 0.1398
2.5 0.1398 −0.5241 ]
|H 2|=0−2[(2×−0.5241)−(2.5×0.1398)]+2.5[(2×0.1398)−(2.5×−0.1118)]
=4 .1932 ¿ 0
The H́ is negative definite; the output function is relative maximum.

A172 QUESTION FOUR (23 MARKS)

a) Find the following integral:
x
∫ 3 x 2+1 dx
i. (4
marks)
x −1
∫ 3 x 2+1 dx=∫ x⋅( 3 x 2+1 ) dx

2
Let u=3 x +1
du=6 x⋅dx
du
=x⋅dx
6
x 1
∫ 3 x 2+1 dx=∫ x⋅3 x 2+1⋅dx
1 du
=∫ ⋅
u 6
1 1
6∫ u
= ⋅du

1
= ln|3 x 2 +1|+c
6

ii. ∫ x √(x+1)dx (5

8
 marks)

Let u= √ x +1
2 2
u =x+ 1 , x=u −1
du
2u =1 2 u du=dx
dx ,

∫ x √(x +1 )dx =∫ ( u2−1 ) (u )⋅2udu

=2∫ (u 4−u2 )du

u5 u3
[
=2 − +c
5 3 ]
2 3 2
= u ( 3u −5 ) +c
15
3
2
= ( x +1 ) 2 ( 3 ( x+ 1 )−5 ) + c
15
3
2
= ( x +1 ) 2 ( 3 x−2 ) +c
15
b) Find the total cost if the marginal cost is MC¿ 3 e 0.5Q and fixed cost are 10.
MC¿ e 0.5Q (4 marks)

∫ 3e0.5 Q dQ=3∫ e0.5 Q

1
(
= 3⋅ ⋅e0 . 5Q + c
0 .5 )
0 .5 Q
=6 e +c
FC=10, when Q=0

TC(Q=0)=6 e 0. 5( 0)+c=10
6+c =70
c=64
0 .5 Q
∴TC=6 e +4
c) Given the demand function P=35−Q and supply function P=3+ Q 2s
2
d

i. Find the producer’s surplus assuming pure competition. (5 marks)

PD =PS Q
PS=P⋅Q−∫0 S(Q )⋅dQ
2 2
35−Q d =3+Q s 4
2 2
=(19)(4 )−∫0 (3+Q2S )⋅dQ
Q +Q =35−3

9
 2
2Q =32 Q3 4
Q2 =16
(
=76− 3Q+ |0
3 )
Q=4 4
3

P=35−( 4 )
2 [
=76− 3 ( 4 ) +
3 ]
P=19 =76−33.33
=42.67

ii. On the Cartesian xy-space, illustrate your finding in i) with the suitable
sketch. (Hint: Consider Quadrant I only) (6 marks)

Producer’s surplus

Quantity, unit
4 5.9
A181 QUESTION TWO (33 MARKS)
a)
Find the relative extremum of the functions f (x , y )=e2 x −2 x+2 y 2 +3 and
identify whether the extremum is relative maximum or minimum using second
order conditions. (5
marks)

First Order Condition

∂f ∂f
=f =f
∂x x ∂y y
f x =2 e2 x −2=0 f y =4 y =0
2 e2 x =2 x=0.5
e 2 x=1
2 x ln e=ln1
x=0
Second Order Condition
2x
f xx =4 e f yy=4
=4 e 2(0 )
=4
f xy =0 f yx =0
f xx⋅f yy ¿f xy⋅f yx ¿

(4)(4) > 0

10
 16 > 0

The function is relative minimum.

b) To reduce shipping distances between the manufacturing facilities and a major
consumer, a Korean computer brand, Inter Corp. intends to start production of
a new controlling chip for Pentium III microprocessors at their two Asian

plants. The cost of producing x 1 chips at Chiangmai (Thailand) is

2
C1 =0 . 002 x 1 + 4 x 1 +500 , and the cost of producing x2 chips at Kuala
2
Lumpur (Malaysia) is C2 =0 . 005 x 2 +4 x 2 + 275 . The Korean computer
manufacturer buys them for RM150 per chip.

i.) Find the quantity that should be produced at each Asian location to
maximize the profit. (8
marks)

TR x =P x 1 ¿ Q x1 TR x =Px 2 ¿ Q x 2
1 2

=150 x 1 =150 x 2
TR=TR x + TRx 2
1

=150 x 1 +150 x 2
TC=C1 +C2
=（ 0 . 002 x 21 + 4 x 1 +500 )+(0 . 005 x 22 + 4 x 2 +275 )

=0 . 002 x 21 + 0 .005 x 22 + 4 x 1 +4 x2 +775

π =TR−TC
=150 x 1 +150 x 2−( 0 . 002 x 21 +0 . 005 x22 +4 x 1 + 4 x 2 +775 )
2 2
=150 x 1 +150 x 2−0 . 002 x1 −0 . 005 x2 −4 x 1−4 x 2−775

=146 x 1 +146 x 2 −0 .002 x 21−0. 005 x 22−775

∂π ∂π
π 1= π 2=
∂ x1 ∂ x2
146−0. 004 x 1 =0 146−0. 01 x 2=0
−0 . 004 x1 =−146 −0 . 01 x 2 =−146
x 1=36500 x 2=14600
∴ The quantity that should be produced at each Asian location to

11
 maximize profits is
x 1=36500 units and x 2=14600 units.

ii.) Using the second order condition (SOC), prove that the profit is at the
maximum. (3
marks)

π 11=−0. 004 , π 12=0

π 21=0 , π 22=−0 . 01

π 11 π 12
H=
[ π 21 π 22 ]
H= −0 .004 0
[0 −0. 01 ]
|H 1|=−0.004 ¿ 0 |H 2|=|H|

|H|=|−0.004 0 |
0 −0.01
=−0. 00 4(−0 .01 )−( 0)(0 )
=0 . 00004>0
The H is negative definite, the profit function is maximum relative.
c) A firm produces two goods in quantities x and y. Its cost function is

C( x , y)=10 x+xy +10 y and the prices Px and P y it can charge are,

respectively,
Px =50−x+ y and P y =30+2 x− y . The firm is committed
to delivering a total of 15 units. How much should the firm produce each good
to maximize profits?

(10
marks)

π = Total revenue – total cost

π ( x , y )=( P x X +P y Y )−C (x , y)
π ( x , y )=[ (50−x + y )x +(30+2 x− y ) y ] − [ 10 x+ xy+10 y ]
=[(50 x−x 2 + xy )+(30 y +2 xy− y 2 )]−(10 x +xy+10 y )
2 2
=50 x−x +xy+30 y +2 xy− y −10 x−xy−10 y

12
 2 2
=40 x−x +20 y+2 xy − y
π ( x , y )=40 x−x 2 +20 y +2 xy− y 2 s.t x+ y=15
L( x , y , λ)=40 x−x 2 +20 y +2 xy− y 2 + λ[15−( x + y )]
Lx =40−2 x−2 y−λ=0
L y =2 x +20−2 y−λ=0
L λ=15−x− y=0
Ax=b

−2 2 −1 x −40
[ 2 −2 −1 y = −20
−1 −1 0 λ −15 ][ ] [ ]
−2 2 −1
|A|=| 2 −2 −1 |
−1 −1 0
=−2(0−1)−2(0−1 )−1(−2−2)
=8
By using Cramer rule
−40 2 −1
|−20 −2 −1|
−15 −1 0
x=
8
−40(0−1)−2(0−15 )−1(20−30)
x=
8
80
=
8
=10
−2 −40 −1
| 2 −20 −1|
−1 −15 0
y=
8
−2(0−15)+40(0−1 )−1(−30−20)
y=
8
40
=
8
=5

13
 −2 2 −40
| 2 −2 −20 |
−1 −1 −15
λ=
8
−2(30−20 )−2(−30−20 )−40(−2−2)
λ=
8
240
=
8
=30
∴ The firm produce of x is 10, y is 5 and λ is 30 to maximize
profits.
d) Maximise 𝑓 = 𝑥−𝑦2 subject to 𝑥2 + 𝑦2 ≤ 4, where 𝑥, 𝑦 ≥ 0
i) Write the Lagrangian function. (2 marks)
L( x , y , λ)=x− y 2 + λ [ 4−( x 2 + y 2 ) ]

ii) Write the Kuhn-Tucker conditions for this maximization problem

(5 marks)
Marginal condition, Non-negative condition, Complementary-slackness
condition
Lx =1−2 xλ≤0 x≥0 x(1−2xλ)=0
L y =−2 y−2 yλ≤0 y≥0 y(−2 y−2 yλ )=0
L λ=4−x 2 − y 2 ≥0 λ≥0 2 2
λ( 4−x − y )=0

A181 QUESTION THREE (22 MARKS)

a) Find

i.) ∫ 25 xex dx (4
marks)
u=25 x x
dv=e dx
du=25 dx
v=∫ dv=∫ e x dx
v=e x

∫ 25 xex dx=(e x )(25 x)−∫ e x⋅25⋅dx

=25 xe x −25∫ e x⋅dx
x x
=25 xe −25 e +c

ii.) ∫ 5 x 4 ( x5 +7)19 dx (3

14
 marks)

5 4
let u=x + 7 , du=5 x dx
∫ 5 x4 ( x5 +7)19 dx=∫ u19 du
u20
= +c
20
( x 5 +7 )20
= +c
20
b) A firm’s marginal revenue and marginal cost functions are given by MR=10-
4Q and MC=1. If fixed costs are 4, find the profit when Q=2 (6
marks)

MR=10-4Q MC=1

TR=∫ MR TC=∫ MC

4 Q2 ∫ 1⋅dQ=Q+c
∫ 10−4 Q⋅dQ=10 Q− 2
+c
when Q=0, TC=4
2
=10 Q−2 Q +c
Q+c=4
when TR(Q=0)=0
c=4
2
10(0 )−2(0 ) +c=0
∴TC=Q+4
c=0
2
∴TR=10 Q−2 Q
π =TR−TC

π =(10 Q−2Q2 )−(Q+4 )

2
=10Q−2Q −Q−4
2
=9Q−2Q −4
the profit when Q=2

π=9 (2 )−2(2 )2−4

=6
The profit when Q=2 is 6.

15
c) Given demand function 𝑃 = 30 − 4𝑄

i) Find the consumer’s surplus at 𝑄 = 5. (4 marks)

P=30−4 (5)
=30−20
P=10 , Q=5
Q
CS(Q)=∫0 D(Q)⋅dQ−P⋅Q
5
=∫0 (30−4 Q )⋅dQ−(10)(5 )
5 5
=∫0 30⋅dQ−4 ∫0 Q⋅dQ−50

Q2 5
(
= 30 Q−4
2 0
| −50( ))
=( 30Q−2Q2 )|50−50
=30(5 )−2 ( 52 )−50
=150−50−50
=50

ii) Illustrate your finding in i) using an appropriate diagram. (5

marks)

16