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X X X X X F X X X R X D: Question 1 (20 Marks - 5 Each)

This document contains an economics assignment with 6 questions regarding mathematical economics concepts. Question 1 defines the domains of 4 functions. Question 2 involves graphing 2 functions, finding critical points and inflection points. Question 3 finds the global maxima and minima of 2 functions. Question 4 analyzes the total, average and marginal costs of production. Question 5 finds where marginal revenue is maximized for a revenue function. Question 6 calculates price elasticities for 3 demand functions.

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80 views6 pages

X X X X X F X X X R X D: Question 1 (20 Marks - 5 Each)

This document contains an economics assignment with 6 questions regarding mathematical economics concepts. Question 1 defines the domains of 4 functions. Question 2 involves graphing 2 functions, finding critical points and inflection points. Question 3 finds the global maxima and minima of 2 functions. Question 4 analyzes the total, average and marginal costs of production. Question 5 finds where marginal revenue is maximized for a revenue function. Question 6 calculates price elasticities for 3 demand functions.

Uploaded by

Evan Aziz
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Assignment #1 Economics 211: Introduction to Mathematical Economics Spring 2012

Question 1 (20 marks 5 each) Define the domains of the following functions: 1. f (x ) =
f (x ) =

12 x 5 2 x 4 + x 2 + 5 2 - we need (2 x + 4 ) 0 so x 2 . The domain: D : x R, x 2 2 (2 x + 4)


x 2 2x 8 - we need x 2 9 0 so x 3,3 . The domain: D : x R, x 3,3 2 x 9

2. 3.

f (x ) =

x10 10 7x
2

-we

need

7 x2 0

so 7 x 2 or

7 < x< 7.

The

domain:

D : x R, 7 < x < 7 4. x2 2 f (x ) = 2 - we need x 2 + 2 0 the denominator is always positive. The domain: D : x R x +2

Question 2(20 marks 10 each)


(a) Graph, labeling all critical points and inflection points:

First order derivative: y ' = 15 x 4 15 x 2 Critical points: 15 x 4 15 x 2 = 15 x 2 ( x 2 1) = 0


x = 0, x = 1, x = 1

3 critical points: (x,y)=(0,0) , (x,y)=(1,-2) , (x,y)=(-1,2) Second order derivative: y '' = 60 x 3 30 x Define min/max: y '' ( 0 ) = 60 x 3 30 x = 0 inflection point

y '' (1) = 60 x3 30 x = 30 > 0 min y '' ( 1) = 60 x3 30 x = 30 < 0 max


Define Concave up/ Concave down:

y '' = 60 x 3 30 x = 30 x 2 x 2 1 = 0 x = 0 or 2 x 2 1 = 0 if 2 x 2 1 = 0 2 x 2 = 1 x 2 =
1 2

x=
1 2

1 2 1 2

3 inflection points: (x,y)=(0,0) , (x,y)=( If x < If


1 2 1 2

,-1.23) , (x,y)=(-

,1.23)

- concave down

< x < 0 - concave up


1 2

If 0 < x < If x >


1 2

- concave down

- concave up
2.5

1.5

0.5

0 -1.4 -1.3 -1.2 -1.1 -1 -0.9 -0.8 -0.7 -0.6 -0.5 -0.4 -0.3 -0.2 -0.1 -0.5

(0,0)
0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4

-1

-1.5

-2

-2.5

4 x 2 2 x + 13 (b) Graph, labeling all critical points and inflection points: y = x2

Asymptote: vertical at x=2, no horizontal asymptote. First order derivative:

(8 x 2)(x 2) (4 x 2 2 x + 13) 1 = 4 x 2 16 x 9 y' = ( x 2 )2 ( x 2 )2

Critical points: x1, 2 =

16 16 2 4 4 (9) 16 20 = = 4.5,0.5 24 8

2 critical points: (x,y)=(4.5,34) , (x,y)=(-0.5,-6) Second order derivative:

(8 x 16)(x 2)2 (4 x 2 16 x 9) 2(x 2)1 = 50 y' ' = ( x 2 )4 (x 2)3


50

Define min/max: y ' ' (4.5) =

(4.5 2)3

> 0 min

No inflection point since y ' ' 0 Define Concave up/ Concave down: If x>2, y ' ' > 0 concave up If x<2, y ' ' < 0 concave down

Question 3 (10 marks 5 each)

Find the global maximums and global minimums of the following functions:

g ' ( x ) = 3 x 2 3 = 3 x 2 1 = 0 x = 1, x = 1(not in domain) g (1) = 1 3 = 2 critical po int (1, 2) g ''( x) = 6 x g ''(1) = 6 > 0 min
We have 1 critical point in the domain, (1,-2) and we know its a min. we still need to calculate the value of the function on the border:

g ( 0 ) = 03 3 0 = 0 g ( 5 ) = 53 3 5 = 125 15 = 110 So global min is (1,-2) and global max is (5,110)

h '( x) =

( 2 x ) ( x 2 + 1) x 2 ( 2 x )

(x (

+1

2x x +1
2

=0 x=0

h ( 0 ) = 0 critical po int (0, 0) h ''( x) = 2 x2 + 1 2 2 x2 x2 + 1 ( 2 x )


2 4

( ( x + 1)

2 x 2 + 1 2 8x 2 x2 + 1
2

) (x

+1

6 x 4 4 x 2 + 2

(x

+1

h ''(0) = 2 > 0 min We have 1 critical point, (0,0) and we know its a min. we still need to calculate the value of the function when x goes to infinity (and infinity) horizontal asymptote. As x goes to infinity (and infinity) the value of the function goes to 1. So (0,0) global min, no global max the max value of the function goes to 1.

Question 4 (20 marks)


Assume the cost to manufacture x units is given by:

(a)What are the xed costs of production? (b)What are the total variable costs when 100 units are produced? (c)What is the marginal cost when 100 units are produced? (d)Using your solution to(c), estimate the cost to produce103 units. (e)At what production level is average cost minimized? (f)Find the average cost and the marginal cost at the minimum point you found in (e) (g)Prove that when ever the marginal cost exceeds the average cost, the average cost is an increasing function.

(a) 500 (b) vc(100) = 100 + 10 100 = 1100 100


200 2X (c) MC (100) = 100 + 10 = 100 + 10 = 12
2

(d) Estimation: TC (103) = (a )500 + (b)1100 + (c)12 3 = 1636 Exactly: TC (103) = 103 + 10 103 + 500 = 1636.09 100 (e)
x AC ( x) = 100 + 10 + 500 x 1 AC '( x) = 100 500 = 0 x2 1 100
2

500 x2

50000 = x 2 x = 223.61

x cant be negative number. We need to verify that 223.61 is minimum.

AC ''( x) = 1000 x3 AC ''(223.61) > 0 min


(f)

AC (223.61) = MC (223.61) =

223.61 100

500 + 10 + 223.61 = 14.47

2223.61 100

+ 10 = 14.47

(g) Prove on presentation 4, slide 4.

Question 5 (15 marks)


Assume is the revenue generated from selling x units. Find the number of units

where marginal revenue is maximized

MR( x) = R( x) ' = 3 x 2 + 300 + 2 x MR( x) ' = 6 x + 2 = 0 6x = 2 x =


1 3

MR( x) '' = 6 < 0 max


Some students found the number of units where revenue (and not marginal revenue) is maximized. It is not the right answer, but I will accept this answer too: R ( x) ' = 3 x 2 + 300 + 2 x = 0 2 4 4 (3) 300 2 60 = = 10.333, 9.666 6 6 R ( x) '' = 6 x + 2 x1,2 = R (10.3333) '' = 6 (10.333) + 2 = 60 < 0 max (We ignore the second critical point since x>0)

Question 6 (15 marks 5 each elasticity)


(a) Calculate the elasticity of the following demand functions: (1) X = 90 3P (2) X = 50 5 P (3) X = 6 3p3

(b) For each function calculate the interval of P where the good is elastic and inelastic and find the value of p (if exist) that have unit elasticity. (1) X ' (P ) = 3

= X ' (P )

P P 3P = 3 = X 90 3P 90 3P

3P = 1 3P = (90 3P ) 6 P = 90 P = 15 90 3P

P=15 unit elasticity. P<15 inelastic. P>15 elastic (2) X ' (P ) = 5

= X ' (P )

P P 5P = 5 = X 50 5 P 50 5 P

5P = 1 5 P = (50 5 P ) 10 P = 50 P = 5 50 5 P

P=5 unit elasticity. P<5 inelastic. P>5 - elastic (3) X ' (P ) = 18 P 4 = 18 P4

= X ' (P )

P 18 P 18 P 18 = 4 3 = = = 3 X 6P 6 P 6P

The elasticity is 3 in absolute value. The good is elastic for any value of p.

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