Scribd
Upload
10 views4 pages

B13703083 Worksheet3

The document is a worksheet for a Calculus course at National Taiwan University, focusing on optimizing costs and profits. It covers concepts such as cost functions, average cost, marginal cost, and profit maximization, along with specific questions and tasks related to these topics. Students are required to derive functions, analyze intersections, and prove relationships between costs and profits.

Uploaded by

tianxiaotu95
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
10 views4 pages

B13703083 Worksheet3

The document is a worksheet for a Calculus course at National Taiwan University, focusing on optimizing costs and profits. It covers concepts such as cost functions, average cost, marginal cost, and profit maximization, along with specific questions and tasks related to these topics. Students are required to derive functions, analyze intersections, and prove relationships between costs and profits.

Uploaded by

tianxiaotu95
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 4

National Taiwan University - Calculus 1 for Class 10-13 (Year 113)

Worksheet 3 : Optimizing Costs and Profits

Name: ID: Department:

Minimizing Costs.
Let C(x) be the cost of producing x units of a commodity. Part of the cost is independent of the output level x and
is referred as the fixed cost, whereas the rest of the cost that depends on x is called the variable cost. In other
words, if we denote the fixed cost by F and the variable cost by Cv (x), then

C(x) = F + Cv (x)

and by convention we assume that F = C(0). We further define :


C(x)
• the average cost function by AC(x) = ,
x
Cv (x)
• the average variable cost function by AVC(x) = ,
x
d
• the marginal cost function by MC(x) = C(x).
dx
The goal of a firm is to minimize the average cost or the average variable cost.

Question 1. Suppose that the cost function is given by C(x) = x3 4x2 + 8x + 18.
(a) Derive the marginal cost function, the average cost function and the average variable cost function.
Sketch the graphs of these functions on the same figure.

1
(b) Find the output level x such that (i) the average cost is minimized,
(ii) the marginal cost function intersects the average cost function.
Are these answers the same?

(c) Find the output level x such that (i) the average variable cost is minimized,
(ii) the marginal cost function intersects the average variable cost function.
Are these answers the same?

2
Question 2. In general, consider any di↵erentiable cost function.
(a) Prove that the marginal cost function always passes through the minimum points of both the average cost
function and the average variable cost function.

(b) Show that lim+ AVC(x) = MC(0).


x!0

Maximizing Profits.
Now we look at the profit of a firm which equals to the revenue minus the cost. i.e. if R(x) denotes the revenue
when x units are produced and sold and C(x) represents the cost, then the profit of selling x units equals to
⇧(x) = R(x) C(x). It is assumed that the second derivatives of both R(x) and C(x) exist and are continuous.

Usually, the goal of a firm is to maximize the profit. We will discuss some interesting consequences when profit is
maximized by using the First and Second Derivative Tests.

3
Question 3.
(a) Prove that if the profit attains a local maximum at x0 > 0, then R0 (x0 ) = C 0 (x0 ) and R00 (x0 )  C 00 (x0 ).

(b) In a competitive market, the unit price of a commodity is a constant p0 . Write down, in this case, the revenue
function R(x). Deduce that when the profit is maximized, the marginal cost equals to p0 .

(c) Suppose that for a certain commodity,


• when x units are demanded, the unit price is p(x) = 0.0032x + 10,
• the cost of producing x units is C(x) = 4000 + 2x 0.0012x2 .
Write down its revenue function R(x) and its profit function ⇧(x). Then find the maximum profit.

You might also like