16.

MANUFACTURING PROFIT Rafael estimates that it costs $14 to produce each unit of a particular
commodity that sells for $23 per unit. There is also a fixed cost of $1,200.

a. Express the cost C(x), the revenue R(x), and the profit P(x) as functions of the number of units x
that are produced and sold.

Number of units produced and sold is x

The cost to produce each unit is $14

Selling price $23 per unit

Fixed cost $1,200

Revenue = (number units sold) (selling price) ------ R (x) = x * 23 --

R (x) = 23x

Cost function:

Costs = (cost per units) (number units) + fixed cost

C (x) = 14x + 1,200

Profit function:

P (x) = R (x) – C (x)

P (x) = 23x -14x - 1200

P (x) = 9x - 1200

b. How much profit is generated when x = 2,000 units are produced?

P (x) = R (x) – C (x) P(x) = 9x - 1200 P(2000) = 9 (2000) - 1200

P (2000) = 18000 - 1200

P (2000) = 16800

The profit is $16,800

When x = 100 units?

P (x) = 9x – 1200

P (100) = 9(100) -1200

P (100) = 900 – 1200

P (100) = -300 if 100 units are sold, there is a loss of $300.

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 What is the smallest number of units that must be produced for Rafael’s company to be profitable?

Inequality: 9x – 1200 > 0

Add each side 1200 ---- 9x – 1200 + 1200 > 0 + 1200

9x > 1200 ---- 9x (1/9) > 1200 (1/9)

X = 400/3 x= 133.33 x= 133

The smallest number of units to be produced is 133 units for Rafael’s company to be profitable.

c. What is the average profit function AP(x)?

AP (x) = P(x)/ x ------- AP (x)= 9x -1200/x

= 9x / x – 1200 /x
= 9 – 1200/x

The average profit function AP (x) = 9 – 1200/x

What is the average profit when 2,500 units are produced?

AP (x) = 9 – 1200/x

AP (2500) = 9 – 1200 / 2500

= 8.52

The average profit when 2,5000 units are produced is $8.52

17. MANUFACTURING PROFIT A manufacturer estimates that each unit of a particular commodity can be
sold for $3 more than it costs to produce. There is also a fixed cost of $17,000 associated with the
production of the commodity.

a. Express total profit P(x) as a function of the level of production x.

* sold for $3 more than it costs to produce

* fixed cost of $17,000

Profit = R -C and R= (# items sold) (price of item) in this case the price is $3 more than the cost per unit

Profit = profit per unit * number of units – fixed cost

P (x) = 3x – 17000 this is profit function of x

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 b. How much profit (or loss) is generated when x = 5,000 units are produced?

P (x) = 3x – 17000 P (5000) = 3 (5000) -17000 = -2000

The profit is -$2000 when x = 5000

When x = 20,000?

P (20000) = 3(20000) – 17000

P (20000) = 43000 The profit is $43,000 when x = 20000

What is the smallest number of units that must be sold for production to be profitable?

3x – 17000 > 0

3x – 17000+17000> 0 + 17000

3x>17000

3x(1/3)>17000(1/3)

x> 17000/3 =5666.67 The smallest number is 5667

c. Find the average profit function AP(x).

AP (x) = P ( x ) / x

= 3x – 17000 / x

AP (X) = 3 – 17000/x

What is the average profit when 10,000 units are produced?

AP (10000) = 3 – 17000/ 10000

= 3 – 1.7

AP (10000) = 1.3

The average profit when 10000 units are produced is $1.3

MARKET EQUILIBRIUM In Exercises 30 through 33, supply and demand functions, S(x) and D(x), are
given for a particular commodity in terms of the level of production x. In each case:

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 (a) Find the value of Xₑ for which equilibrium occurs and the corresponding equilibrium price Pₑ

(b) Sketch the graphs of the supply and demand curves, p =S(x) and p = D(x), on the same graph.

(c) For what values of x is there a market shortage? A market surplus?

30.S(x) = 4x + 200 and D(x) = -3x + 480

a. Market equilibrium occurs when

S (x) = D (x)

4x + 200 = -3x + 480

4x + 3x = 480 – 200

7x = 280

X = 280/ 7

X = 40

Equilibrium occurs when Xₑ = 40

Pₑ = D (40) = - 3(40) +480 D (40) = -120 + 480 D (40) = 360 S(40) = 4(40) + 200 = 360

Pₑ = $360 Corresponding equilibrium price.

b.

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 c. There is a market shortage when demand exceeds supply D (x) > S (x) and surplus when supply
exceeds demand S (x) > D (x)

Market shortage = x < 40.

Surplus = x > 40

31. S(x) = 3x + 150 and D(x) = -2x + 275

a. 3x + 150 = -2x + 275

3x + 2x = 275 -150 5x = 125 x = 125/ 5 x = 25

Equilibrium occurs when Xₑ = 25

Pₑ = D (25) = - 2(25) + 275

= - 50 + 275

= 225

Pₑ = $225 Corresponding equilibrium price

b.

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 c. Market shortage X < 25
Market surplus x > 25

32. S(x) = x^2 + x + 3 and D(x) = 21 - 3x^2

a. x² + x + 3 = 21 – 3 x²

x² + 3 x² + x = 21 – 3

4 x² + x - 18 = 0

(4x + 9) (x – 2) = 0

4x + 9 = 0

X = -2.25

X–2=0

X=2

Market equilibrium point Xₑ = 2

Equilibrium price Pₑ = S

= (2) ² + 2 + 3

= $9 Equilibrium price

b.

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 A market shortage = x < 2

Market surplus x > 2

41. SUPPLY AND DEMAND Producers will supply q units of a certain commodity to the market when the
price is p = S(q) dollars per unit, and consumers will demand (buy) q units when the price is p = D(q)
dollars per unit, where S(q) = aq + b and D(q) = cq + d for constants a, b, c, and d.

a. What can you say about the signs of the constants a, b, c, and d if the supply and demand curves are
as shown in the accompanying figure?

b. Express the equilibrium production level qe and the equilibrium price pe in terms of the coefficients
a, b, c, and d.

C. Use your answer in part (b) to determine what happens to the equilibrium production level qe as a
increases. What happens to qe as d increases?

Supply and demand function:

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 S (q) = aq + b
D (q) = cq + d
q units

a. Supply increases with q (units) increasing with a positive slope. Then, a is positive.

It has a positive intercept on Y axis, then b is positive.

The demand curve is decreasing a q increases, creating a negative slope. Then c is negative.

It has a positive intercept on Y axis, d is positive a= + b= + c = - d= +

b. Equilibrium production level happens when supply = demand:

S(q) = D (q)

aq + b = cq + d

q = d- b / a - c

qₑ = d – b / a -c

Equilibrium price: Pₑ = S (qₑ)

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 = D (qₑ)

Pₑ = a (d – b / a – c) + b or c (d – b / a – c) +d

c. From answer b I can see that qₑ is inversely proportional to a, then qₑ decreases when a
increases.

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