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Calculus/Calculus: Applications to Marginality

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Expert: - 3/23/2010


Question
When production is 2000, marginal revenue is 7.5 dollars per unit and marginal cost is 8 dollars per unit.
a). Do you expect maximum profit to occur at a production level above or below 2000?

(The answer: below 2000).

b). If production is increased by 10 units, what would you estimate the change in profit would be? d(pi)=            dollars


(I'm not sure about part b).

Answer
a) This means that the amount spent ($8) is more than the amount earned ($7.50),
so the maximum should occur somewhere below.

At the maximum, they should be equal.


b) Since for each unit, profit is expect to rise by 7.5 and decrease by 8,
for 10 unis, this would be up by 75 and down by 80, so profit would go by x = 75-80.

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