Program:

Bachelor's Degree in
Marketing and Digital
Communication

Subject: MATHEMATICS APPLIED TO MANAGEMENT

Teacher: María Sanz

T.6 FUNCTION OPTIMIZATION

PROPOSED EXERCISES (with solutions)

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Exercise 1

A company produces seat covers. The total cost of manufacturing is

C(q) = 3q3 + 5q +75. For a production of 60 pcs,
a) What will be the average cost?
b) For what value of q will the average cost be minimum?

Solution: Cm=3q2 + 5 + (75/q) q=2.3

Exercise 2

We have a company whose Profit is given by the function:

B(q)= -2q2 +68q-128.
For what value of q (production) is the average profit per unit equal to the
marginal profit?

Solution: q=8
−2𝑞2 +68𝑞−128.
Ba = 𝑞
Bm=-4q + 68
−2𝑞2 +68𝑞−128.
Ba=Bm: = -4q + 68
𝑞

-2q2 +68q-128 = -4q2 + 68q >>> 2q2 -128= 0 >>> q = 8

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Exercise 3 (ELASTICITY: ONLY IF EXPLAINED)

In a given firm, the demand function is given by: D=60 – 0.1p. We know that the
maximum price is €600.
a) Express the elasticity of demand as a function of q.
b) Calculate the elasticity of demand for p = 200
c) Calculate the price p so that the elasticity of demand is -1.

Solution: E=-0.1p / (60-0.1p)

E=-0.5
p=300€
Exercise 4

The cost function of a firm is given by the expression C(q) = q3 – 52.5q2 +1050q
+6750.
Indicates the functions Average Total Cost and Marginal Cost. Make a graph
with the functions that makes it easier to visualize at what point both coincide.

Solution: Ctmedio= q2 – 52.5q + 1050+ (6750/q)

Cm = 3q2 – 105q + 1050
q=30

Exercise 5

The cost function of a firm is given by the expression C(q)= q2 +5q +36.
Indicates the functions Average production cost and marginal cost. Make a
graph with the functions that makes it easier to visualize at what point both
coincide.

Solution: Average = q+5+36/q

Cm = 2q + 5
q=6

Exercise 6

Let be the profit function of a firm: B = -q2 + 690q -18 .

Find:
a) Level of production that maximizes profits
b) Monetary value of the maximum profit

Solution:
B ́(q)=-2q+690 q= 345 B(345)=119.007

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Exercise 7

Let be the profit function of a firm: B=-2q2 +160q -3500

Find
a) Level of production that maximizes profits
b) Monetary value of the maximum profit
Solution:
B (́ q)=-4q+160 q= 40

B(40)=-300 negative profits indicate the

minimum possible loss in that
business.

Exercise 8

In a monopolistic market, the demand function of the only firm operating in this
area is: p = 10 –q. And its cost function is: C = q2-10q + 30

a) To propose the function of benefits

b) Level of production that maximizes profits
c) Monetary value of the maximum benefit

Solution (a) B(q)=I(q)-C(q)= = -2q2 +20q-30

B ́(q)=-4q+20q=5
B(5)= 20

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Exercise 9
In an oligopolistic market, the demand function of
one of the firms in this sector is p = 20-2q and its
cost function is:
C=2q2 – 140q +150

a) To propose the function of benefits

b) Level of production that maximizes profits
c) Monetary value of the maximum benefit

Solution:a) B(q)=-4q2 + 160q -150

b)B ́(q)= -8q+160 q=20
This photo by Unknown Author is licensed under CC BY-SA
B(20)= 1450 €

Exercise 10

A company manufactures T-shirts whose manufacturing cost is given by the

function Cf(q)= 3q2 + q, with fixed costs of 48.
a) Define the total cost function.
b) What is the average cost of manufacturing?
c) For what production is the average cost minimum?
d) What is the marginal cost? For what production is the value of marginal cost
equal to average cost?

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 Solution: C(q)=3q2 + q
+ 48
Cme=3q + 1 +
(48/q)
q=4
Cmg=6q+1
q=4

Exercise 11

An automotive workshop consumes 600 wheels per year, for which it pays
€60/unit. The cost of storing each unit is €0.90 per year, and for each order that
is placed, the shipping costs are €30 regardless of the number of wheels
requested.
a) Define the Cost function based on the units in each order x.
b) How many wheels should be requested in each order so that the total cost is
minimal?
Solution: C=0.45x + (18000/x)+36000
X=200 wheels
Exercise 12

A furniture company produces its own merchandising: 16,000 units per year,
which it distributes to its subsidiaries evenly all year round. The cost of putting the
3D laser printer to work with which they produce the designs is €100 per batch,
costing €0.06 for the production of each element. The storage cost of these
products is €0.20 per year. Items are automatically printed in batches when
needed.
a) Define the Cost function based on the elements for each lot x.
b) How many batches have to be made to minimise costs?

Solution: C=0.01x + (1800000/x)+ 960

x=4000 items per batch, 4 lots

Exercise 13

In a company of artisanal products, q units of an article are produced. The total

cost of manufacturing that item is given by the function:
f(q)= 3q3 + 8q + 75
a) Define the Average cost per unit function.
b) What must be the level of production for the average cost to be minimal?

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Solution: Cm=Ct / q
q=5

Exercise 14

A technology company has developed a specialized

chip that can be sold in a single batch at €2 a box. It
has currently been able to produce 80 boxes, but if
delivery is delayed by a few days, its production
increases to 1 box per day. However, the buyer has
indicated that for each day of delay, he will pay two
cents less per box.

a) Define the Revenue function based on the

number of days that order x is delayed.
This photo by Unknown Author is licensed b) When is the lot to be delivered to maximize
under CC BY-SA-NC license revenue?

Solution: I=(2-0.02x)(80+x)
x=10 days

Exercise 15

A productivity study on a manufacturing line indicates that in the night shift,

manufacturing as a function of elapsed time can be expressed through the
function:
Q(t) = -t3 + 6t2 +15t
Since workers work 8-hour shifts, at what time of the shift is productivity higher?
Solution: t=5

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Exercise 16

A nut retailer buys 600kg of peanuts a year which it sells consistently. Buy from a
wholesaler at the price of 25 cents per kg, but per order you charge 20€ shipping
costs. It has been calculated that the storage cost is 96 cents per kg per year, as
space is at a premium. We assume an idealized distribution situation, where the
delivery of orders is immediate.
.
a) Define the Total cost function as a function of x, where x is the kg of peanuts
per order.
b) How many orders need to be placed to minimise costs?

Solution: Ct=0.48x + (12000/x) + 150

x=500kg per order

Explanation: Ccompra:600·0,25=150
Shipping: number of shipments · 20 = (600/x)·200
Warehouse: medium mat in warehouse · 0.96 = (x/2) · 0.96 = 0.48x
C (́ x)= 0.48 – 120000/x2 =0 >> x2= 120000/0.48 =>> x=500

Exercise 17

A hardware store buys drills at €25/unit and sells them at €40 each. This month it
has sold 50 units. The owner wants to obtain more profits and proposes to
increase prices, but a previous study indicates that for every euro increase in
price, purchases go down by 3 units:
.
a) Define the Total profit function as a function of x, where x is the final sale price
per unit.
b) What will be the optimal price to maximize profits?

Solution: B=-3x2+245x+450
x=41€

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Exercise 18
Let be the revenue function of a firm: I = -3q2 + 600q + 1560 .
Find:
a) Level of production that maximizes income
b) Monetary value of the maximum income

́ -6q+600 equals 0 q= 100

Solution: I =
Imax= I(100)=31560

Exercise 19

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For a scooter manufacturer, manufacturing a scooter costs €20 per unit. In
addition, the company's fixed costs are €1000. The price per scooter depends on
the number of units sold and is given by the function

.𝑷(𝒒) = 𝟐𝟎𝟎 − 𝟑𝒒

a) Define the benefit function.

b) How many units does the company have to sell, at least, to avoid losses?

Solution: B=-1000 + 180q - 3q2

q=30

Exercise 20

A company develops a very promising new product. Its economic department

indicates that the demand function will be given as a function of price, of form;

p+0.1q = 80 (q is the number of units sold per month

and p its selling price)
They also tell us that the cost of producing each unit is €20 and that the
corresponding fixed costs are €5000
a) Calculate Marginal Costs and Marginal Revenues.
b) Define the Profits function.
c) At what price will the maximum profits be obtained?

Solution:
a) C(q) = 5000+20q
I(q)=(80-0,1q)q= 80q – 0,1q2
Cm = C (́ q)=20
Im = I (́ q)=80-16q
b) B = - 0.1q2 + 60q - 5000
c)B ́=- 0.2q+60 and we equal 0 to find the
optimum
q=300
Check with the second derivative that it is a maximum:
B"=-0.2 < 0 is a maximum.

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Exercise 21

We have ten wood milling machines of special width in the workshop, capable of
working at 30 linear meters per hour. We have been ordered to mill 8000meters
of material with a special design (material provided by customer). The cutter has
to be specially purchased for this job and costs 20€ each unit, needing one for
each router we use. Once the work has started, it is automatic, but there will be a
manager watching the workshop, with an impact on this work of €4.80/h:
.
a) Define the Total Cost function as a function of x. What is x?.
b) How many milling machines need to be put to work to minimise costs?

Solution: Ct=20x + (1280/x) where x is the number of milling machines

running
x=8
Explanation:
Number of milling machines we put to work: X
Cutter change cost: 20x
Meters of material per hour depending on the cutters we put to work: 30x/h
Time it takes to place the whole order: 8000/30x hours
Attendant price based on previous time: 4.8 ·8000 /30x
Total costs depending on the number of cutters:
Ct(x)= cutter change cost + ordered cost:
= 20x + 4.8 ·8000 /30x

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