Business Mathematics

Assignment
Deadline: August 30, 2023; Time 11:55pm

The assignment needs to be handwritten and emailed on

[email protected], [email protected] (Section A),
[email protected], [email protected] (Section B) be-
fore the deadline.

1. Suppose that you are a manager in a firm that produces watches. The pro-
duction technology to produce watches can be written as

y = k 1/2 l1/2

where k represents the units of capital employed at the production facility, l is

the number of labor hours employed and y is the total production of watches.
Assume that labor costs $20 per hour and that capital costs $450 per unit.

(a) Suppose that you are currently employing 120 units of capital. If you have
expected sales equal to 1,200. Calculate your optimal choice of labor.

(b) Given your answer to previous part, calculate total and average costs?

2. Suppose the cost function C(x) is a continuously differentiable function for

producing x output. Then show that,

(a) if marginal cost (dC(x)/dx) is greater than average cost (AC(x) = C(x)/x),
AC is increasing

(b) if marginal cost is less than average cost, AC is decreasing, and

(c) at an interior minimum of AC, average cost = marginal cost.

3. The cost function is given

c(Q) = 120 + 3Q + Q2

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 where Q is the produced output.

(a) Find formulas for fixed cost, variable cost and average cost?

(b) Assume marginal cost function is M C(Q) = 3 + 2Q. At what output

level Q, the average cost lowest? (Hint: average cost = marginal cost)

(c) What is the minimum average cost?

4. Sketch the graph of the following equations. Label the vertex, axis and in-
tercepts in each case. Find Maximum and Minimum point on the graph if
exists.

(a) y = −x2 − 6x − 5

(b) y = 21 x2 + x + 4
√ √ √
(c) 2x − 3y = 6
√ √ √
(d) The line passes through (− 2, 2) parallel to the line 2x + 5y = 3.
Find the equation of the line also.

(e) The line passes through (1/3, 4) and has slope 0. Write the equation of
the line also.

(f) The line passes through (−9, 0) and (−1, 3). Find the equation of the
line also.

5. Assume that you are interested in buying a zero coupon bond. It has a ma-
turity of 25 years, a price of $462, and a par value of $1000. Assume that
interest is compounded annually. What is the yield on this bond?
p
6. Suppose the total cost of producing x units is given as c(x) = 1 − (x − 1)2
and the total revenue from selling x units is given by 1−x. Find the breakeven
point.

7. Suppose that your bank pays you a 12% annual interest rate, compounded
continuously, on your investments. If you deposit $250 today, how much money
will you have in exactly six years?

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 8. What is the product of the roots of 2x2 + 9x − 5 = 0?

9. Simplify

ln(35)+ln(1/7)
(a) ln(25)
√
(b) 3 ln( 3 t2 − 1 − ln(t + 1))
x √
(c) ln(ee ) + ln( e)

(d) eln(πx)−ln 2

(e) ln(y 2 − 1) − ln(y + 1) = ln(sin x)

2
(f) ex e2x+1 = et , solve for t
2)
(g) 25log5 (3x
x
(h) log4 (2e sin x
)
1
(i) solve the equation, ln e + 4−2 log4 (x)= x log10 (100)
2
(j) solve 3log3 (x ) = 5eln x − 3 × 10log10 (2)

10. What would be the interest rates to double your initial investment in 5 years?
How long will it take for your investment to grow 4 times the initial investment
when interest rates are 15%?

11. (a) In July 2010, Mike deposits $100 semiannually into an account com-
pounding semiannually at 7% nominal annual interest for three years.
In July 2013, he increases the deposit to $200 every 6 months, but the
interest rates falls to 5% for that year. In July 2014, he deposits $2000
more (in addition to the previous deposits) in the bank for 5 years at a
fixed rate of 6%. The interest rates from July 2014 to end of 2018 remain
fixed at 6%. Find the value of his savings at the end of 2018.

(b) In addition to the above information, Mike starts paying $200 annually in
an endowment fund in January 2019. Assuming a flat interest rate curve
at 7% from January 2019 onwards, find the value of his cash outflows in
2019. Furthermore, find the amount he must own in 2010 to fulfill all the
deposits in part (a) and payments in part (b).

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12. For a small firm in the purely competitive industry, the total cost function can
be approximated by the following equation

T C = $4, 8000 + $2.40Q + $0.06Q2

in which Q is the annual output rate in thousands.

(a) Determine the output that minimizes the total cost. Calculate the cost.

(b) Use a graph to illustrate your results.

13. Suppose the cost function C(x) is a continuously differentiable function for
producing x output. Then show that,

(a) if marginal cost (dC(x)/dx) is greater than average cost (AC(x) = C(x)/x),
AC is increasing

(b) if marginal cost is less than average cost, AC is decreasing, and

(c) at an interior minimum of AC, average cost = marginal cost.

14. Use definition of derivatives to find the derivatives of the following.

0 0 0
(a) f (x) = 4 − x2 ; f (−3) =?, f (0) =?, f (1) =?

0 0
(b) f (x) = (x − 1)2 + 1; f (−1) =?, f (2) =?

15. Find up to second order derivatives of the following functions.

√
1+x−4 x
(a) f (x) = x3

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(b) f (x) = (x2 −1)(x2 +x+1)

16. Suppose that it costs

c(x) = x3 − 6x2 + 15x

dollars to produce x radiators when 8 to 30 radiators are produced and that

r(x) = x3 − 3x2 + 12x

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gives the dollars revenue from selling x radiators. Your shop currently produces
10 radiators a day. Above how much extra will it cost to produce one more
radiator a day and what is your estimated increase in revenue for selling 11
radiators a day?