ECONOMICS (ECO401)

ASSIGNMENT # 02
Student ID: bc210206087

The Case:
Samsung is a South Korean company and its global success story was started with the
launch of the Galaxy S series of smartphones by the end of 2000. Now, Samsung is
included among top 5 companies that are manufacturing electronic apparatuses in all
over the world. Samsung is considered as one of the main suppliers of electronic goods
such as flash memory, chips, semiconductors, batteries and hard drive to other
manufacturing companies such as Sony, Nokia etc. The company is also providing a
wide range of electronic products to consumers, like smartphones, tablets, audio
sounds, smart switches, refrigerators, air solutions, monitors etc. During COVID-19
pandemic, Samsung supported the global fight with corporate social responsibility
(CSR) initiatives such as the smart factory program and also providing training to
human resources. Samsung has also been working on different projects with United
Nations Development Program (UNDP) for achieving Sustainable Development Goals,
for example, Samsung launched generation 17 program.
Suppose total revenue (TR) and total cost (TC) functions of Samsung are following:
TR = 175Q – 2.5Q2
TC = 50 + 10Q
Requirements: a. Calculate profit maximizing output level of Samsung using
marginal revenue (MR) and marginal cost (MC) approach.
Solution:
Profit is maximized at the where,
MC = MR
And, MC function can be found by taking derivative of total cost (TC) function.
MC = dTC/dQ
MC = d/dQ (50+10Q)
MC = 10
MR function can be found by taking derivative of total cost (TR) function
MR = d(TR)/dQ
MR = d/dQ (175Q+2.5Q2)
MR = 175-5Q
Putting values of MC and MR in: MC = MR
 ECONOMICS (ECO401)
ASSIGNMENT # 02
Therefore,
10 = 175 - 5Q
5Q = 10 - 175
Q = 165/5
Q = 33
b. Find out the amount of profit earned by Samsung at profit maximizing level of
output calculated in part a.
Solution:
For calculating profit:
Profit = TR – TC
T = (175Q-2.5Q2) - (50+10Q)
T= 175Q - 2.5Q2 – 50 - 10Q
Putting Q = 33,
We get,
T=175(33) - 2.5(33)2 - 50 - 10(33)
T = 5445 - 2722.5 - 50
T = 2672.5
Profit maximized where the output is 33 and the maximum profit is 2672.5
c. Calculate average revenue (AR) function and slope of average revenue (AR)
function.
Solution:
We can calculate AR by:
TR = 175Q - 2.5Q2
AR = TR/Q
AR = 175Q - 2.5Q2/Q
AR = 175Q/Q – 2.5Q2/Q
AR = 175-2.5Q

Putting Q=33, as we have the value of Q.

 ECONOMICS (ECO401)
ASSIGNMENT # 02
AR = 175-2.5(33)
AR = 175-82.5
AR = 92.5
Slope of Average revenue (AR) function
Slope of AR = d(AR)/dQ
Slope of AR = d/dQ (175 - 2.5Q)
Slope of AR = - 2.5