1.

The figure below shows cost (blue) and revenue (black) functions over the domain 0<q<45 (in
thousands of units).

a) For what production levels is the profit function positive?

(Give your answer as an interval or a list of intervals, e.g., (-infinity,8] or (1,5),(7,10) .)

b) For what production levels is the profit function negative?

(Give your answer as an interval or a list of intervals, e.g., (-infinity,8] or (1,5),(7,10) .)

c) Estimate the production at which profit is maximized. q ≈ ____________ thousands of units.

1. The figure below shows cost (blue) and revenue (black) functions over the domain 0<q<45 (in
thousands of units).

a) For what production levels is the profit function positive?

(Give your answer as an interval or a list of intervals, e.g., (-infinity,8] or (1,5),(7,10) .)
The profit function is positive when R(q)>C(q). It's positive for 16.5< q<37.5

b) For what production levels is the profit function negative?

(Give your answer as an interval or a list of intervals, e.g., (-infinity,8] or (1,5),(7,10) .)
The profit function is negative when R(q)<C(q). It's negative for 0<q<16.5 and 37.5<q<45.

c) Estimate the production at which profit is maximized. q ≈ ____________ thousands of units.

Profit is maximized when R(q)> C(q) and R'(q)=C'(q), which occurs at about q=28.5.
 2. The revenue from selling q items is R(q) =700q-q2, and the total cost is C(q)=175+14q.
Write a function that gives the total profit earned, and find the quantity which maximizes the
profit.

2. The revenue from selling q items is R(q) =700q-q2, and the total cost is C(q)=175+14q.
Write a function that gives the total profit earned, and find the quantity which maximizes the
profit.
The profit function π(q) is given by:
π(q) = R(q) - C(q) =700q-q2 -175-14q
π(q) = 686 q -q2 -175

The maximum profit occurs when:

π'(q) =686−2q=0 so q=343 items.
Since π''(q) =−2, this critical point is a maximum.
Alternatively, we obtain the same result from the fact that the graph of π(q) is a parabola opening
downward.
3. The table below shows cost, C(q) and revenue, R(q).

a) At approximately what production level, q, is profit maximized?

q ≈____________ units.

b) What is the price of the product?

price = __________ dollars

c) What are the fixed costs?

fixed costs = _________ dollars
3. The table below shows cost, C(q) and revenue, R(q).

a) At approximately what production level, q, is profit maximized?

q ≈____________ units.
Profit is maximized when R(q)-C(q) is as large as possible. This occurs at q=2500, where:
profit=13125−9907.25= 3217.75 dollars.

b) What is the price of the product?

price = __________ dollars
We see that R(q)=5.25q and so the price is 5.25 dollars per unit.

c) What are the fixed costs?

fixed costs = _________ dollars
Since C(0)=4250, the fixed costs are 4250 dollars.
4. The total cost C(q) of producing q goods is given by: C(q) = 0.01q3 -0.6q2+14q

a) What is the fixed cost?

b) What is the maximum profit if each item is sold for 6 dollars?

(Assume you sell everything you produce. Also note that you can only
produce a whole number of goods.)

c) Suppose we fix production at 32 goods produced, and that they all sell
when the price is 6 dollars each. Also suppose that for each 1 dollar
increase in price, 2 fewer goods are sold (so if the price is 7 dollars, 30 of
the 32 goods being produced are sold.)

To maximize profit in this case, we should [increase , decrease , neither]

the price by _______________ dollars.
 4. The total cost C(q) of producing q goods is given by: C(q) = 0.01q3 -0.6q2+14q

a) What is the fixed cost?

The fixed cost is 0 because C(0)=0.

b) What is the maximum profit if each item is sold for 6 dollars?

(Assume you sell everything you produce. Also note that you can only
produce a whole number of goods.)
Profit, π(q) is equal to money from sales, 6q, minus total cost to produce those items, C(q).
So π(q)=6q−(0.01q3−0.6q2+14q).

This is maximized when its derivative is zero, or when π(q)=6−(0.01)(3)q2−(0.6)(2)q+14=0.

Using the quadratic formula, we find q≈8.45299 or q≈31.547

Now π''(q)=−[(0.01)(3)(2)q−1.2], so π''(8.45299)>0 and π''(31.547)<0

This means q=8.45299 is a local minimum and q=31.547 a local maximum.
We now evaluate the endpoint π(0)=0, and the points nearest q=31.547 with integer-values:
π(31)=30.69 and π(32)=30.72 .
So the maximum profit is π =30.72.

c) Suppose we fix production at 32 goods produced, and that they all sell
when the price is 6 dollars each. Also suppose that for each 1 dollar
increase in price, 2 fewer goods are sold (so if the price is 7 dollars, 30 of
the 32 goods being produced are sold.)

To maximize profit in this case, we should [increase , decrease , neither]

the price by _______________ dollars.

Next we consider the sale of q =32 items. The money from sales is equal to price × quantity sold.

If the price is raised from 6 dollars by x dollars to 6+x, the result is a reduction in sales from 32 items
to (32−2x) items.

So the result of raising the price by x dollars is to change the money from sales
from (6)(32) to (6+x)(32−2x) dollars.

If the production level is fixed at 32, then the production costs are fixed at C(32)=161.28, and the
profit is given by:
π(x)=(6+x)(32-2x)-161.28
This expression gives the profit as a function of change in price, x, rather than as a function of
quantity as in the previous part of the problem.

We set the derivative of π(x) with respect to x equal to zero to find the change in price that maximizes
the profit.
π'(x) =32-2x-2(6+x)=0. So x=5 (which means we should increase the price), and this must be
a maximum for π(x) since the graph of π is just a parabola opening downward.
5. The average cost per item to produce q items is given by:

a(q)=0.01q2−0.6q+16, for q>0

What is the total cost, C(q), of producing q goods?

What is the minimum marginal cost?

At what production level is the average cost a minimum?

What is the lowest average cost?

Compute the marginal cost at q=30.

5. The average cost per item to produce q items is given by:

a(q)=0.01q2−0.6q+16, for q>0

What is the total cost, C(q), of producing q goods?

The average cost of producing q items is the total cost divided by the number of items, so we have
that a(q) = C(q)/q thus C(q) = 0.01q3-0.6q2+16q

What is the minimum marginal cost?

Then the marginal cost is the derivative of the total cost, so MC(q)=C'(q)=0.03q2−1.2q+16.
To find the minimum marginal cost, we find its derivative and set it to zero.
MC'(q )=0.06q−1.2=0, gives q=20.
We know this is a global minimum because the marginal cost is an upward opening parabola.
Then the minimum value is just MC(20)=4.
The physical interpretation of the marginal cost is that it is the increase in cost when an
additional unit is produced, so this is the minimum such increase.

At what production level is the average cost a minimum?

q=20

What is the lowest average cost?

We minimize the average cost in the same way as before.

a'(q)=0.02q−0.6=0 when q=30, at which point a(30)=7. This is a global minimum because
a(q) is also an upward-opening parabola.

Compute the marginal cost at q=30.

Finally, plugging in, we get MC(30)=7. We note that this is the same as the minimum average
cost!
Analytically we can see that this must be the case by looking at the definition of the average
cost: a(q)=C(q)/q , so its minimum occurs when a'(q)=0 or, when C'(q)=C(q)/q.
That is, when the marginal cost, which is equal to C'(q), is equal to the average cost.
 Math 115 / Final (April 26, 2013) page 10

9. [15 points] For each question below, there is only one correct answer. Circle exactly one
answer. Unclear answers will receive no credit. There is no penalty for guessing.
a. [3 points] A company’s maximum profit is earned when it produces q = 20 goods. If its
marginal cost function is given by

M C(q) = 7q,

which of the following could be the company’s revenue function?

A. R(q) = q + 120
B. R(q) = 7
C. R(q) = q 7 + 2
D. R(q) = 2q 2 + 60q
1 7
E. R(q) = 20 q +2

b. [3 points] The number ℓ is a positive constant. Which of the following numbers is the
maximum value of the function f (x) = (x − ℓ)3 + 12ℓ3 on the closed interval [−ℓ, 2ℓ]?
(These numbers are y-values, not x-values).
A. 11ℓ3
B. 20ℓ3
C. 13ℓ3
D. 4ℓ3
E. 12ℓ3

University of Michigan Department of Mathematics Winter, 2013 Math 115 Exam 3 Problem 9
 Math 115 / Final (April 26, 2013) page 10

9. [15 points] For each question below, there is only one correct answer. Circle exactly one
answer. Unclear answers will receive no credit. There is no penalty for guessing.
a. [3 points] A company’s maximum profit is earned when it produces q = 20 goods. If its
marginal cost function is given by

M C(q) = 7q,

which of the following could be the company’s revenue function?

A. R(q) = q + 120
B. R(q) = 7
C. R(q) = q 7 + 2
D. R(q) = 2q 2 + 60q
1 7
E. R(q) = 20 q +2

b. [3 points] The number ℓ is a positive constant. Which of the following numbers is the
maximum value of the function f (x) = (x − ℓ)3 + 12ℓ3 on the closed interval [−ℓ, 2ℓ]?
(These numbers are y-values, not x-values).
A. 11ℓ3
B. 20ℓ3
C. 13ℓ3
D. 4ℓ3
E. 12ℓ3

University of Michigan Department of Mathematics Winter, 2013 Math 115 Exam 3 Problem 9 Solution
 Math 115 / Final (April 28, 2014) page 10

9. [9 points] With winter past and summer approaching, David is opening a business selling ice.
Graphed below are his marginal revenue M R (solid line) and marginal cost M C (dashed line),
in dollars per ton of ice.
y ($/ton)
1000
y = MC
900
800
y = MR
700
600
500
400
300
200
100
q (tons)
10 20 30 40 50 60 70 80 90 100

a. [4 points] Carefully estimate the answer to each of the following based on the graphs above.
You do not need to show your work.
(i) For what value(s) of q in the interval [0, 100] is revenue maximized?
Answer: q =

(ii) For what value(s) of q in the interval [0, 100] is M R maximized?

Answer: q=

(iii) For what value(s) of q in the interval [0, 100] is profit maximized?
Answer: q =

(iv) For what value(s) of q in the interval [0, 100] is M R − M C maximized?

Answer: q =

b. [3 points] Let π(q) be David’s profit, in dollars, if he sells q tons of ice. Suppose that
David would make a profit of $4000 if he sold 95 tons of ice. Find an equation for the
tangent line to the graph of y = π(q) at q = 95.

Answer:

University of Michigan Department of Mathematics Winter, 2014 Math 115 Exam 3 Problem 9
 Math 115 / Final (April 28, 2014) page 10

9. [9 points] With winter past and summer approaching, David is opening a business selling ice.
Graphed below are his marginal revenue M R (solid line) and marginal cost M C (dashed line),
in dollars per ton of ice.
y ($/ton)
1000
y = MC
900
800
y = MR
700
600
500
400
300
200
100
q (tons)
10 20 30 40 50 60 70 80 90 100
a. [4 points] Carefully estimate the answer to each of the following based on the graphs above.
You do not need to show your work.
(i) For what value(s) of q in the interval [0, 100] is revenue maximized?
Answer: q = 100

(ii) For what value(s) of q in the interval [0, 100] is M R maximized?

Answer: q= 60

(iii) For what value(s) of q in the interval [0, 100] is profit maximized?
Answer: q = 80

(iv) For what value(s) of q in the interval [0, 100] is M R − M C maximized?

Answer: q = 50

b. [3 points] Let π(q) be David’s profit, in dollars, if he sells q tons of ice. Suppose that
David would make a profit of $4000 if he sold 95 tons of ice. Find an equation for the
tangent line to the graph of y = π(q) at q = 95.
Solution: The slope of the tangent line is given by π ′ (95), which we can read off the
graph as the difference between M R and M C at q = 95, or about −600. Since the line
passes through the point (95, 4000), we therefore have the equation y = 4000−600(q−95).

Answer: y = 4000 − 600(q − 95)

University of Michigan Department of Mathematics Winter, 2014 Math 115 Exam 3 Problem 9 Solution
 Math 115 / Final (December 17, 2013) page 3

2. [12 points] Link has started a business selling winter clothes for cats. Among his most
successful products are his new kitten mittens. He is currently selling his mittens for $7 per
set. Below is a graph of Link’s marginal cost MC(q) and marginal revenue MR(q), in dollars
per set of mittens, if he makes q sets of mittens this winter. Due to a shortage of yarn, Link
can make a maximum of 200 sets of mittens this winter. In order to start making mittens, Link
must spend $40 on knitting supplies (in other words, it costs $40 to make 0 sets of mittens).
dollars/set
10
8 MR(q)
6 MC(q)
4
2
q
20 40 60 80 100 120 140 160 180 200
You do not need to show any work for this problem.
a. [3 points] Approximately how many sets of mittens should Link make this winter in order
to maximize his profit?

Answer: Link should make about sets of mittens.

b. [4 points] Link makes a deal with a store that would like to buy his cat hats. If the store
buys up to 50 hats, then each one will cost $10. If the store buys more than 50 hats, then
Link will reduce the price of the entire order by $0.05 per hat for every additional hat
over 50. (For example, if the store buys 52 hats, they will pay $9.90 per hat.) Write a
formula for a function L(q) which gives Link’s revenue if he sells q hats to the store.





 if 0 ≤ q ≤ 50
L(q) =



if q > 50



University of Michigan Department of Mathematics Fall, 2013 Math 115 Exam 3 Problem 2 (cat clothes)
 Math 115 / Final (December 17, 2013) page 3

2. [12 points] Link has started a business selling winter clothes for cats. Among his most
successful products are his new kitten mittens. He is currently selling his mittens for $7 per
set. Below is a graph of Link’s marginal cost MC(q) and marginal revenue MR(q), in dollars
per set of mittens, if he makes q sets of mittens this winter. Due to a shortage of yarn, Link
can make a maximum of 200 sets of mittens this winter. In order to start making mittens, Link
must spend $40 on knitting supplies (in other words, it costs $40 to make 0 sets of mittens).
dollars/set
10
8 MR(q)
6 MC(q)
4
2
q
20 40 60 80 100 120 140 160 180 200
You do not need to show any work for this problem.
a. [3 points] Approximately how many sets of mittens should Link make this winter in order
to maximize his profit?

Answer: Link should make about 104 sets of mittens.

b. [4 points] Link makes a deal with a store that would like to buy his cat hats. If the store
buys up to 50 hats, then each one will cost $10. If the store buys more than 50 hats, then
Link will reduce the price of the entire order by $0.05 per hat for every additional hat
over 50. (For example, if the store buys 52 hats, they will pay $9.90 per hat.) Write a
formula for a function L(q) which gives Link’s revenue if he sells q hats to the store.





 10q if 0 ≤ q ≤ 50
L(q) =




 (10 − 0.05(q − 50))q if q > 50

University of Michigan Department of Mathematics Fall, 2013 Math 115 Exam 3 Problem 2 (cat clothes) Solution
 Math 115 / Final (April 23, 2015) page 9

9. [10 points] Months later, the now infamous Roderick has been dethroned. Before Erin returns
to the University of Michigan, she visits Roderick to hear his side of the story. He encourages
her to share his story. Erin is in fact quite a good storyteller, so she begins to consider a career
as a travelling storyteller. She decides to charge clients for her time (in hours).
a. [3 points] Shown below are graphs of the cost, C, and marginal revenue, MR, of Erin’s
potential storytelling business. Note that both graphs are continuous and piecewise linear.

Carefully sketch the graph of Erin’s marginal cost function on the same axes as the given
graph of her marginal revenue. (That is, draw the graph of marginal cost on the set of
axes on the right.)
Dollars Dollars per hour
1600 70
1400
C 60
1200
50
1000 MR
40
800
30
600
400 20

200 10

0 q (hrs) 0 q (hrs)
0 10 20 30 40 0 10 20 30 40
b. [3 points] Let π(q) be Erin’s profit from q hours of work as a travelling storyteller.
Estimate all the critical points of π(q) for 0 < q < 40.

Answer: critical point(s) at q =

University of Michigan Department of Mathematics Winter, 2015 Math 115 Exam 3 Problem 9 (storytelling)
 Math 115 / Final (April 23, 2015) page 9

9. [10 points] Months later, the now infamous Roderick has been dethroned. Before Erin returns
to the University of Michigan, she visits Roderick to hear his side of the story. He encourages
her to share his story. Erin is in fact quite a good storyteller, so she begins to consider a career
as a travelling storyteller. She decides to charge clients for her time (in hours).
a. [3 points] Shown below are graphs of the cost, C, and marginal revenue, MR, of Erin’s
potential storytelling business. Note that both graphs are continuous and piecewise linear.
Carefully sketch the graph of Erin’s marginal cost function on the same axes as the given
graph of her marginal revenue. (That is, draw the graph of marginal cost on the set of
axes on the right.)
Dollars Dollars per hour
1600 70
1400 C bc bc
60
1200
50
1000 MR
40
800
30 bc
600
20 bc
400
200 10 MC

0 q (hrs) 0 q (hrs)
0 10 20 30 40 0 10 20 30 40

b. [3 points] Let π(q) be Erin’s profit from q hours of work as a travelling storyteller.
Estimate all the critical points of π(q) for 0 < q < 40.
Solution: To find critical points of π(q) we (i) look for points where MC=MR and (ii)
look for points where π ′ (q) = MC − MR is undefined. The marginal cost equals marginal
revenue when q = 10 110 ′
3 and q = 3 and the derivative π (q) is undefined when q = 20 and
q = 30.
10 110
3 , 20, 30, 3
Answer: critical point(s) at q =

University of Michigan Department of Mathematics Winter, 2015 Math 115 Exam 3 Problem 9 (storytelling) Solution
 Math 115 / Final (December 17, 2015) page 10

10. [8 points] Gen is setting up a business selling hot chocolate in Srebmun Foyoj and, due to
local restrictions, she will be able to produce and sell no more than 200 gallons. She has
determined that the total cost, in dollars, for her to produce g gallons of hot chocolate can be
(
modeled by √
100 + 90 g if 0 ≤ g ≤ 100
C(g) = 5 0.05g
400 − 10e + 6g + 10e if 100 < g ≤ 200
and that for 0 ≤ g ≤ 200, the revenue, in dollars, that she will bring in from selling g gallons
of hot chocolate is given by
R(g) = 15g.
a. [4 points] For what quantities of hot chocolate sold would Gen’s marginal revenue equal
her marginal cost?

Answer:

b. [4 points] Assuming Gen can sell up to 200 gallons of hot chocolate, how much hot
chocolate should she produce in order to maximize her profit, and what would that
maximum profit be? You must use calculus to find and justify your answer. Be sure to
provide enough evidence to justify your answer fully.

Answer: gallons of hot chocolate: and max profit:

University of Michigan Department of Mathematics Fall, 2015 Math 115 Exam 3 Problem 10 (hot chocolate)
 Math 115 / Final (December 17, 2015) page 10

10. [8 points] Gen is setting up a business selling hot chocolate in Srebmun Foyoj and, due to local
restrictions, she will be able to produce and sell no more than 200 gallons. She has determined
that the total cost, in dollars,
( for her to produce g gallons of hot chocolate can be modeled by
√
100 + 90 g if 0 ≤ g ≤ 100
C(g) = 5 0.05g
400 − 10e + 6g + 10e if 100 < g ≤ 200

and that for 0 ≤ g ≤ 200, the revenue, in dollars, that she will bring in from selling g gallons
of hot chocolate is given by
R(g) = 15g.
a. [4 points] For what quantities of hot chocolate sold would Gen’s marginal revenue equal
her marginal cost?
(
45g −1/2 if 0 ≤ g < 100
Solution: We have R′ (g) = 15 and C ′ (g) = 0.05g
6 + 0.5e if 100 < g ≤ 200.
For 0 ≤ g < 100, marginal revenue is therefore equal to marginal cost when 45g −1/2 = 15,
so g 1/2 = 3 and g = 9. When 100 < g ≤ 200,
6 + 0.5e0.05g = 15
e0.05g = 18
0.05g = ln(18)
g = 20 ln(18) ≈ 57.8

However, this value of g is not in the domain of this piece, so M C and M R are never
equal on this piece.
Note: We can also conclude that no such point exists on this interval by noting that
since 6 + 0.5e0.05·100 > 80 and M C is increasing, MC never equal 15.

Answer: 9 gallons

b. [4 points] Assuming Gen can sell up to 200 gallons of hot chocolate, how much hot choco-
late should she produce in order to maximize her profit, and what would that maximum
profit be? You must use calculus to find and justify your answer. Be sure to provide
enough evidence to justify your answer fully.
√
Solution: Note that C(g) is continuous, since 100 + 90 100 = 1000 and 400 − 10e5 +
6 · 100 + 10e0.05·100 = 1000.
The profit function is given by π(g) = R(g) − C(g). Since both R(g) and C(g) are
continuous, we may, by the Extreme Value Theorem, consider only critical points and
endpoints of the domain. The endpoints are at g = 0 and g = 200, and the critical points
are at g = 9 (by previous part) and g = 100 (where M R is undefined).
π(0) = 0 − 100 = −100
√
π(9) = 15 · 9 − (100 + 90 9) = 135 − 370 = −235
π(100) = 1500 − 1000 = 500
π(200) ≈ −217, 380

(The last is because π(200) = 15 · 200 − (400 − 10e5 + 6 · 200 + 10e0.05·200 )

= 3000 − (400 − 10e5 + 1200 + 10e10 ) ≈ 3000 − 220380 = −217, 380.)
Therefore the max occurs at g = 100, which results in a profit of $500.

Answer: gallons of hot chocolate: 100 and max profit: $500

University of Michigan Department of Mathematics Fall, 2015 Math 115 Exam 3 Problem 10 (hot chocolate) Solution