APPLICATIONS OF SINGLE VARIABLE FUNCTIONS IN ECONOMICS

Economic functions

1. The supply and demand equations of a good are given by P  Q  8 and P  3Q  80 .

a. Sketch the demand and supply curves.

b. Determine the equilibrium price and quantity.

2. Consider a demand function Q  250  P 2 and a supply function Q  50  5 P . Find the

equilibrium price and quantity.

3. Given the demand curve Q  150  3P and supply curve 2P 3 . Find the equilibrium price
and quantity.

4. Given the following demand functions, express TR as a function of Q and hence sketch
the graphs of TR against Q.

a. P  4 .

7
b. P  .
Q

c. P  10  4Q .

5. Given that fixed costs are 1500 and that variable costs are 20 per unit, express TC and
AC as functions of Q. Hence sketch their graphs.

6. A company has a revenue function TR  150Q  0,5Q 2 and a cost function

TC  50Q  500 .

a. Determine the profit function  .

b. Calculate the profit when 100 units are sold.

7. Given the revenue function TR  80Q and the cost function TC  30Q  1000 . Find the
break-even point.
Marginal functions

8. Find the marginal-cost and average cost function from the following total-cost functions:

a. TC  4Q 3  2Q 2  25Q .

b. TC   Q3  3Q  16  5Q  .

c. TC  25  6Q.e 2Q .

9. Determine the marginal-revenue function associated with each of the following demand
curves (P= price, Q= quantity demanded).

a. P  200  3Q .

b. PQ  100 .

c. P  250  e 4Q .

10. A firm has a cost function

TC  2Q 2  20Q  300

and its demand function is

4 p  q  260 .

Determine

a. The marginal-cost function.

b. The marginal-revenue function.

c. The marginal-profit function.

d. The value of Q for which marginal revenue equals marginal cost.

11. The demand function for a product is P  177  Q 2 and the cost function is

TC  30  2Q  2Q 2 . Determine the profit function and hence the marginal-profit function.

For what level of output is marginal profit zero?
 1
12. Given the total cost function TC  Q3  8Q 2  120Q .
3

a. Deduce the equation for MC.

b. Estimate the approximate change in TC as output, Q increase from 15 to 16 units using

equation.

13. If the demand function is P  100  4Q .

a. Find expressions for TR and MR in terms of Q.

b. Estimate the change in TR brought about by a 0,3 unit increase in output from a current
level of 12 units.

14. The fixed costs of producing a good are 100 and the variable costs are 2 + Q/10 per
unit.

a. Find expressions for TC and MC.

b. Evaluate MC at Q = 30 and hence estimate the change in TC brought about by a 2 unit

increase in output from a current level of 30 units.

c. At what level of output does MC = 22?

15. A firm’s fixed costs are 1000 and variable costs are given by 3Q.

a. Write down the equation for TC. Calculate the value of TC when Q=20.

b. Write down the equation for MC. Calculate the value of MC when Q=20. Describe, in
words, the meaning of MC for this function.

16. Find the marginal cost given the average cost function

100
AC   2.
Q

Deduce that a 1 unit increase in Q will always results in a 2 unit increase in TC, irrespective
of the current level of output.
17. The total revenue function is TR  250Q  4Q 2 and the total cost function is
TC  50Q  1000 .

a. Find the marginal profit function.

b. Estimate the change in profit when production decreases from 40 to 39 units.

Elasticity

18. Find the elasticity of demand when P=10 for the following demand functions

a. P  50  2Q .

20
b. P  .
Q

c. 3P  Q  35  0 .

19. For the following demand functions, determine the marginal revenue functions and the
elasticity of demand when Q  5

200  5Q
a. P  .
3

b. P  350  13Q .

c. P  500  3e 2Q .

20. The total revenue of the exclusive distributor at each output Q is TR  500Q  4Q 2 .
Compute the price elasticity of demand with the product of the distributor at the price
P  300 .

21. The demand function for a good is given as follows

Q  3200  0,5 P 2 .

Calculate the price elasticity of demand at the prices P  20 and P  50 .

22. The demand for seats at a cup final is given by the equation Q  192  P 2 .
a. Derive an expression for the price elasticity of demand in terms of P.

b. At P=10, what is the percentage change in the quantity demanded when price increases
by 5%.

23. The demand for soft drinks is given by the equation: Q  100  2 P .

a. Write down the equations for TR, MR, AR.

b. Derive an expression for the price elasticity of demand in terms of P.

c. At Q=40, what is the percentage change in the quantity demanded when price decreases
by 2%.

1200
24. Given the demand equation: Q  .
P2

a. Determine the price elasticity of demand.

b. If the price increases by 3%, use elasticity to calculate the percentage change in demand.

b. If the price decreases by 5%, use elasticity to calculate the percentage change in demand.

Optimization

25. The total cost of producing an output Q is given by

1
T C  500  4Q  Q 2
2

Obtain the value of Q which minimizes the average cost.

26. If the demand function for a monopolist’s product is P  10  2Q .

a. Determine the price and output required to maximise the total revenue.

b. What is the elasticity of demand at this price?

27. The total cost function for a product is TC  Q 3  20Q 2  20 and the demand function
is P  240  Q . Find the price and level of output required to maximise a monopolist’s
profit.
28. A monopolist has a demand function P  400  5Q and the total cost function is

TC  50  6Q  Q 2 . Determine the level of output which gives

a. The maximum value of total revenue.

b. The minimum value of average costs.

c. The maximum value of profit.

29. Given the cost function

C  Q   Q 3  6Q 2  13Q  15 ,

Find the minimum marginal cost.

30. If a total cost function is

C  Q   0, 0001Q3  12Q  100

a. Is the marginal cost increasing, decreasing, or not changing at Q  100 ?

b. Find the minimum marginal cost

31. The revenue function for a one-product firm is

1600
R  Q   200  Q .
Q 8

Find the value of Q that results in maximum revenue.

32. The revenue function for a particular product is R  Q   Q  4  0, 0001Q  . Find the largest

possible revenue.

33. A one-product firm estimates that its daily, total cost function (in suitable units) is

C  Q   Q 3  6Q 2  13Q  15

and its total revenue function is R  Q   28Q . Find the value of Q that maximizes the daily

profit.
34. A small tie shop sells ties for $3.50 each. The daily cost function is estimated to be
C  x  dollars, where x is the number of ties sold on typical day and

C  x   0, 0006 x3  0, 03 x 2  2 x  20

Find the value of x that will maximize the store’s daily profit.

35. The demand equation for a certain commodity is

1 2
P Q  10Q  300 ,
12

0  Q  60 . Find the value of Q and the corresponding price Q that maximize the revenue.

36. The demand equation for a product is

P  2  0, 001Q .

Find the value of Q and correspoding price P that maximize the revenue.

37. Until recently hamburges at the city sports arena cost 4$ each. The food concessionaire
sold an average of 10,000 hamburges on a game night. When the price was raised to $4, 40
, hamburge sales dropped off to an average of 8000 per night.

a. Assuming a linear demand curve, find the price of a hamburge that will maximize the
nightly hamburges revenue.

b. If the concessionaire has fixed costs of $1000 per night and the variable cost is $0.60
per hamburge, find the price of a hamburge that will maximize the nighly hamburge profit.

38. In the planning of a side walk café, it is estimated that for 12 tables, the daily profit will
be $10 per table. Because of overcrowding, for each additional table the profit per table
(for every table is café) will be reduced by $0.50. How many tables should be provided to
maximize the profit from the café?

39. The demand equation for a company is P  200  3Q , and the cost function is
 C  Q   75  80Q  Q 2 , 0  Q  40.

a. Determine the value of Q and the corresponding price that maximize the profit.

b. If the government imposes a tax on the company of $4 per unit quantity produced
determine the new price that maximizes the profit.

40. A monopoly producer sells products with the demand function P  1400  7,5Q .

a. Calculate the price elasticity of demand in terms of P.

b. Given marginal cost function MC  3Q 2  12Q  140 . Find the Q point for maximum
profit.

Integral

41. Determine the value of the consumer’s surplus if the demand curve is P  100  6Q
and the market price is 40 .

42. Calculate the consumer surplus:

a. P  50  4Q at P  10 .

200
b. P  at Q  9 .
Q 1

c. P  100  Q 2 at Q  8 .

d. Q  30  0,5 P at P  20 .

43. Calculate the producer surplus

a. P  5  6Q at P  29 .

1
b. P  10  at Q  4 .
Q 1

c. Q  8  2 P at Q  4 .

d. P  Q 2  4 at Q  5 .
44. The demand and supply functions for a good are P  50  2Q and P  14  4Q
respectively.

a. Calculate the equilibrium price and equilibrium quantity.

b. Calculate the consumer surplus and the producer surplus at equilibrium.

45. The demand curve for a product is P  60  Q  Q 2 and the supply function is
P  10  4Q .

a. Determine the equilibrium price and quantity?

b. Determine the value of the consumer’s surplus and the producer’s surplus at this
equilibrium.

46. Obtain the total cost functions from the following marginal cost functions

a. MC  2Q  3 with TC  50 when Q  5 .

b. MC  Q 2  2Q  4 with TC  450 when Q  9 .