EC 2104 Quantitative Methods for Economic Analysis

Problem Set 3 Suggested Solutions

Students will solve selected problems from the following questions during tutorial sessions the week
of February 11, 2019.

1. Solve the following:

Z 1
3
(a) 3x2 ex dx
−∞

Recall that this is equal to the following:

Z 1 Z 1
2 x3 3
3x e dx = lim 3x2 ex dx
−∞ a→−∞ a

For this integral, we should perform a substitution. Let u = x3 . Then du = 3x2 dx.
Also, when x = a, u = a3 , and when x = 1, u = 1.
Z 1 Z 1
2 x3
lim 3x e dx = lim eu du
a→−∞ a a→−∞ a3
1
= lim eu
a→−∞
a3
3
= lim e − ea
a→−∞
= e
Z 10
d
(b) 5x2 + 2x + 1 dx
dt 3t

Using the formula for differentiation with variables in the bounds of integrals, we see
that this is equal to the following:
d 10 2
Z
d d
5x + 2x + 1 dx = (5x2 + 2x + 1) (10) − (5x2 + 2x + 1) (3t)
dt 3t x=10 dt x=3t dt
= −3(5(3t)2 + 2(3t) + 1)
= −135t2 − 18t − 3
Z
(c) x3 e2x dx

We will integrate by parts. Choose f (x) = x3 and g 0 (x) = e2x . Then, f 0 (x) = 3x2
and g(x) = e2x /2.
x3 e2x 3
Z Z
x3 e2x dx = − x2 e2x dx
2 2

1
 Now, we will integrate the remaining integral by parts. Choose f (x) = x2 and g 0 (x) =
e2x . Then, f 0 (x) = 2x and g(x) = e2x /2.
x3 e2x 3 x2 e2x
Z  Z 
3 2x 2x
x e dx = − − xe dx
2 2 2
Finally, we integrate the remaining integral by parts one last time. Choose f (x) = x
and g 0 (x) = e2x . Then, f 0 (x) = 1 and g(x) = e2x /2.
x3 e2x 3x2 e2x 3 xe2x
Z  Z 2x 
3 2x e
x e dx = − + − dx
2 4 2 2 2
x3 e2x 3x2 e2x 3xe2x 3e2x
= − + − +C
2 4 4 8

2. The Marginal Revenue function, M R(Q) is defined as follows:

(
Q2 if 0≤Q≤1
M R(Q) =
2Q3 − 1 if 1≤Q≤2

Find the Total Revenue from producing 2 units of Output, Q.

Z 2 Z 1 Z 2
M R(Q) dQ = M R(Q) dQ + M R(Q) dQ
0 0 1
Z 1 Z 2
= Q2 dQ + 2Q3 − 1 dQ
0 1
 3 1 2
Q Q4
= + −Q
3 0 2 1
1 1
= + (8 − 2) − ( − 1)
3 2
5
= 6
6
3. The Net Investment function, I(t) is defined as the rate of change of capital stock, K(t), i.e.
dK
I=
dt
Given that I(t) = te−t , find the total amount of capital stock accumulated from t = 0 to ∞.
Z ∞
This can be found as follows: xe−x dx
0

Recall that this is equal to the following:

Z ∞ Z a
−x
xe dx = lim xe−x dx
0 a→∞ 0

2
 For this integral, we should use integration by parts.
Z a Z a
lim xe−x dx = lim −e−x x − e−x dx
a→∞ 0 a→∞ 0
a 1
= lim 1 − −
a→∞ ea ea
= 1−0−0
= 1

The second last equation comes from the use of L’Hopital Rule.

a 1
lim
a
= lim a = 0
a→∞ e a→∞ e

4. We first separate the variable by rearranging terms:

dP (t)
= tdt
P (t)2

Integrating both sides, we get:

Z Z
−2
P (t) dP (t) = t dt

t2
−P (t)−1 + c1 = + c2
2
1 t2 + 2c2 − 2c1
− =
P (t) 2
−2
P (t) =
t2 + c

6000
5. Given the following demand function D(P ) = − 50 and the supply function S(P ) =
P
P − 10. What are the consumer and producer surplus?

First, let’s find the market equilibrium by setting D(P ) = S(P ):

6000
− 50 = P − 10
P
6000 − 50P = P 2 − 10P
P 2 + 40P − 6000 = 0
(P + 100)(P − 60) = 0

3
Only P ∗ = 60 is the only positive solution to this equation. This occurs at Q∗ = 50. Now,
we want to use the equations for consumer and producer surplus. These require that we have
6000
the inverse demand and supply functions: D−1 (Q) = , and S −1 (Q) = Q + 10.
Q + 50
Consumer surplus:
Z Q∗
CS = [D−1 (Q) − P ∗ ] dQ
0
Z 50  
6000
= − 60 dQ
0 Q + 50

Now use a substitution. Let u = Q + 50. Then du = dQ.

Z 100 Z 50
du
CS = 6000 − 60 dQ
50 u 0
100
= 6000 ln |u| − 3000
50
= 6000(ln 100 − ln 50) − 3000
= 6000 ln 2 − 3000

Producer surplus:
Z Q∗
PS = [P ∗ − S −1 (Q)] dQ
0
Z 50
= [60 − (Q + 10)] dQ
0
Z 50
= 50 − Q dQ
0
Q2 50
 
= 50Q −
2 0
= 2500 − 1250
= 1250

4
6. Find the total area of the shaded regions below.

y x=1 x=6
4

0 x
-2

y = 1-(4-x)2
-4

-6

-8

-10

-12

-14

-16

To find the area of the shaded region, we need to take some definite integrals. To take
these integrals correctly, we first need to find the bounds of the integrals. We can see that
the regions are defined by the vertical lines x = 1 and x = 6, as well as the function y =
1 − (4 − x)2 = −x2 + 8x − 15 and the points where this function hits the x-axis. So, let’s first
solve for where the function equals 0.

y = 1 − (4 − x)2
0 = 1 − (4 − x)2
(4 − x)2 = 1
4 − x = ±1
x = 4±1
x = 3, 5

Now, in the x intervals (1,3) and (5,6), the area of the shaded regions are found by integrating
0 minus the value of the function. In the interval (3,5), on the other hand, the area of the

5
shaded region is found by integrating over the value of the function:
Z 3 Z 5 Z 6
2 2
A = x − 8x + 15 dx + −x + 8x − 15 dx + x2 − 8x + 15 dx
1 3 5
3 5 6
x3
 3
2 x 2 x3
= − 4x + 15x + − + 4x − 15x + − 4x2 + 15x
3 1 3 3 3 5
 3   3 
3 1
= − 4(3)2 + 15(3) − − 4(1)2 + 15(1)
3 3
 3   3 
5 2 3 2
+ − + 4(5) − 15(5) − − + 4(3) − 15(3)
3 3
 3   3 
6 2 5 2
+ − 4(6) + 15(6) − − 4(5) + 15(5)
3 3
= (18) − (34/3) + (−50/3) − (−18) + (18) − (50/3)
= 28/3