Assessment Task 4:

Problem Solving

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[COMPANY NAME] [Company address]
Problem No: 01
Solution: (a): Explain why Linear Programming Model will be suitable for this Case.
Linear programming model is a model that helps to get the maximum solution of the

problem using mathematical models. These models are implemented and verified using

the mathematical formulas. These models can be used to formulate the real-life

problems and get the appropriate solution, because in this model the objective function

can be define, calculate the inequalities and also find out the object constraints.

Solution: (b): Formulate linear programming model that fit for Model.

A investment amount = X
B investment amount = Y

The optimal solution = 5x + 8y

Constraints of the model
30x + 80y ≤ 60
60x + 40y ≥ 45
40x + 70y ≥ 50
Solution: (C): Formulate linear programming model that fit for fAutumn Cottontory.
Solution: (d):
According to the linear equation model the best fit range of expenses are meet within
the equational model. If the model is not enforced, the cost will be increased, as this the
maximum profit solution.

Solution: (a): Formulate linear programming model that fit for

a) LP model is following:
Let Spring Cotton, Spring Wool, and Spring Silk be the qty (tons) of Cotton, Wool and Silk
to be used to make product Spring.
Autumn Cotton, Autumn Wool, and Autumn Silk be the qty (tons) of Cotton, Wool and
Silk to be used to make product Autumn.
Winter Cotton, Winter Wool, and Winter Silk be the qty (tons) of Cotton, Wool and Silk
to be used to make product Winter.
Max (60-5)(Spring Cotton+Spring Wool+Spring Silk)+(55-4)(Autumn Cotton+Autumn
Wool+Autumn Silk)+(60-5)(Winter Cotton+Winter Wool+Winter Silk)-30(Spring
Cotton+Autumn Cotton+Winter Cotton)-45*(Spring Wool+Autumn Wool+Winter Wool)-
50*(Spring Silk+Autumn Silk+Winter Silk)
or
Max 55 Spring Cotton+ 55 Spring Wool+55 Spring Silk +51 Autumn Cotton+51Autumn
Wool+51Autumn Silk+55Winter Cotton+55Winter Wool+55Winter Silk-30Spring Cotton-
30Autumn Cotton-30Winter Cotton-45Spring Wool-45Autumn Wool-45Winter Wool-
50Spring Silk-50Autumn Silk-50Winter Silk
s.t.
Spring Cotton +Spring Wool +Spring Silk <= 4500
Autumn Cotton +Autumn Wool +Autumn Silk <= 4000
Winter Cotton+ Winter Wool +Winter Silk <= 4000
Spring Cotton>=.5*(Spring Cotton+ Spring Wool+ Spring Silk) or, .5Spring Cotton-
.5Spring Wool-.5Spring Silk>=0
Spring Wool>=.3*(Spring Cotton+ Spring Wool+ Spring Silk) or, -.3Spring Cotton+.7Spring
Wool-.3Spring Silk>=0
Autumn Cotton>=.6*(Autumn Cotton+ Autumn Wool +Autumn Silk) or, .4Autumn
Cotton-.6Autumn Wool-.6Autumn Silk>=0
Autumn Wool>=.4*(Autumn Cotton +Autumn Wool +Autumn Silk) or, -.4Autumn
Cotton+.6Autumn Wool-.4Autumn Silk>=0
Winter Cotton>=.4*(Winter Cotton + Winter Wool + Winter Silk) or, .6Winter Cotton-
.4Winter Wool-.4Winter Silk>=0
Winter Wool>=.5*(Winter Cotton+ Winter Wool + Winter Silk) or, -.5Winter
Cotton+.5Winter Wool-.5Winter Silk>=0
All variables >= 0
Solution: (b): Linear Programming Model
Question No. 3

Solution (a)
In this scenario, the both parties are bidding one by one and in case of both parties bid at the

same price, the bidder with the high positive rate will be consider as winner, because the bidder

with negative rate will lose the points and will be consider as looser.
Solution (b)
Payoff Matrix

Bid 1 Bid 2 Bid 3

Company 1 10 30 50

Company 2 20 40 50

In this payoff matrix the both companies have three different strategies that can be implemented

but both are same at the point of 50. The positive rate of the company 1 is higher that the other

company.

Solution (c) (Saddle point)

A Saddle point is a matrix of position of elements in the payoff matrix, which is minimum in its

row and the maximum in its column.

To check the saddle, point the payoff matrix is examined.

Bid 1 Bid 2 Bid 3

Company 1 10 30 50
Company 2 20 40 50
In this matrix there is no saddle point.
Solution (d) (Linear Programming Model)
The linear programming model is as under.

Let the Company 1 = x

Let the company 2 = y

Objective Function Z = 10x + 20y ≤ 40

Multiplies

10x + 20y ≤ 40

30x + 40y ≤ 40

50x + 50y = 0

Constraints

10x + 20y ≤ 40

30x + 40y ≤ 40

50x + 50y = 0
Solution (e) (Linear Programming Model)

Solution (f) (Linear Programming Model)

In this model the value of success objective function is 32, that means according to the model

the company 1 should bid off 32 instead of 40.

Question 4:

Solution (a)

P = 120 - Q = 120 - q1 - q2

MC1 = MC2 = 60

For Firm 1, Total revenue (TR1) = P x q1 = 120q1 - q1

q1q2

Marginal revenue (MR1) = TR1 / q1 = 120 - 2q1 - q2

Equating MR1 and MC1,

120 - 2q1 - q2 = 60

2q1 + q2 = 60 ............(1) (Best response, Firm 1)

For Firm 2, Total revenue (TR2) = P x q2 = 120q2 - q1q2 - q2

Marginal revenue (MR2) = TR2 / Q2 = 120 - q1 - 2q2

Equating MR2 and MC2,

120 - q1 - 2q2 = 60

q1 + 2Q2 = 60 ............(2) (Best response, Firm 2)

Cournot equilibrium is obtained by solving (1) and (2)

2q1 + q2 = 60 ..............(1)
(2) x 2 results in:

2q1 + 4q2 = 120.............(3)

(3) - (1) results in: 3q2 = 60

q2 = 20

q1 = 60 - 2q2 [From (2)] = 60 - (2 x 20) = 60 - 40 = 20

Q = 20 + 20 = 40

P = 120 - 40 = 80

Market share, rm 1 = q1 / Q = 20 / 40 = 0.5 = 50%

Market share, rm 2 = q2 / Q = 20 / 40 = 0.5 = 50%

Solution (b)

HHI Index = (50)2 + (50)2 = 2,500 + 2,500 = 5,000

Solution (c)

A monopolist maximizes profit by equating MR with MC.

P = 120 - Q

Equating MR & MC,

120 - 2Q = 60

2Q = 60

Q = 30
P = 120 - 30 = 90

In a monopoly, HHI = 10,000

Change in HHI = 10,000 - 5,000 = 5,000 (Increase)

Solution (d)

When MC = 30, equating MR & MC:

120 - 2Q = 30

2Q = 90

Q = 45

P = 120 - 45 = 75

In a monopoly, HHI = 10,000

Change in HHI = 10,000 - 5,000 = 5,000 (Increase)