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1.4 Problem Set 1 - 4

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29 views

1.4 Problem Set 1 - 4

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Linear Equations & Functions (Problem Set 1 – 4)

Problem Set 1 – 4
Text: G. D. Prichett & J. C. Saber
Solutions: Muhammad Shamim
Mark (T) for true or (F) for false. (Assume that cost means factory
cost.) Given that total cost, y, of making x units is y = 5x + 10:
1 ( ) The total cost of making 20 units is $110.

Solution: The statement is true (T).


Explanation: When x = 20 units, then total cost is
TC (y) = 5x + 10
= 5(20) + 10
= 100 + 10
= $110
2 ( ) Average cost per unit is $6 if 10 units are made.
Solution: The statement is true (T).
Explanation: When x = 10 units , then average cost is
TC
AC =
x
5x  10
=
x
5(10)  10
= [Putting x = 10]
10
60
=
10
= $6 per unit.
3 ( ) The marginal cost of the 11th unit is greater than $5.
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Bowen, Prichett & Saber’s Mathematics Manual
Solution: The statement is false (F).
Explanation: We know, in the linear production, marginal cost per unit
will not change at any number of units. So marginal cost per unit is
always $5 in this case.
4 ( ) The marginal cost of the 20th unit is $5.
Solution: The statement is true (T).
Explanation: Since the marginal cost per unit will not change at any
number of units of production, so marginal cost of the 20th unit is $5.

5 ( ) The variable cost per unit decreases as the number of units


made increases.
Solution: The statement is false (F).
Explanation: Variable cost is homogenously related to number of units
made. So the variable cost per unit increases as the number of units made
increases.
6 ( ) The variable cost incurred when making 10 items is $50.
Solution: The statement is true (T).
Explanation: When x = 20 units, then total cost is
VC = 5x
= 5(10)
= $50
7 ( ) Average cost per unit decreases as the number of units made
increases.
Solution: The statement is true (T).
Explanation: Total cost and average cost are inversely related to number
of units made. So the average cost per unit decreases as the number of
units made increases.
8 ( ) Variable cost increases as the number of units made increases.
Solution: The statement is true (T).

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Linear Equations & Functions (Problem Set 1 – 4)
Explanation: Variable cost is homogenously related to number of units
made. So the variable cost per unit increases as the number of units made
increases.
9 ( ) The marginal cost of every unit is the same.
Solution: The statement is true (T).
Explanation: We know, marginal cost per unit is always constant. So
the marginal cost of every unit is the same for any amount of units made.
10 ( ) The slope of the line is the variable cost per unit.
Solution: The statement is true (T).
Explanation: We know, marginal cost per unit and average cost per unit
are the same concept, and we also know that marginal cost per unit and
slope of the line are the same concept. So the slope of the line is same to
the variable cost per unit.
11 If the total factory cost, y, of making x units of a product is given
by y = 3x + 20, and if 50 units are made:
(a) What is the variable cost?
(b) What is the total cost?
(c) What is the variable cost per unit?
(d) What is the average cost per unit?
(e) What is the marginal cost of the 50th unit?
Solution: Given Total cost, y = 3x + 20
(a) When x = 50, variable cost = 3x = 3(50) = 150 (Ans)

(b) When x = 50, total cost (y) = 3x + 20 = 3(50) + 20 = 170 (Ans)

(c) When x = 50, variable cost per unit = 150/50 = 3 (Ans)

(d) When x = 50, average cost per unit = 170/50 = 3.40 (Ans)

(e) When x = 50th unit, marginal cost = 3 (Ans)

12 If the total factory cost, y, of making x units of a product is given


by y = 10x + 500, and if 1000 units are made:
(a) What is the variable cost?
(b) What is the total cost?
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Bowen, Prichett & Saber’s Mathematics Manual
(c) What is the variable cost per unit?
(d) What is the marginal cost of the last unit made?

Solution: Given total cost, y = 10x + 500

(a) When x = 1000, variable cost = 10x = 10(1000) = 10000 (Ans)

(b) When x = 1000, total cost (y) = 10x + 500


= 10(1000) + 500
= 10500 (Ans)
(c) When x = 1000, variable cost per unit = 10000/1000 = 10 (Ans)

(d) When x = last unit, marginal cost = 10 (Ans)

13 A printer quotes a price of $7500 for printing 1000 copies of a


book and $15000 for printing 2500 copies. Assuming a linear
relationship and that 200 books are printed:
(a) Find the equation relating the total cost, y, to x, the number
of books printed.
(b) What is the variable cost?
(c) What is the fixed cost?
(d) What is the variable cost per book?
(e) What is the average cost per book?
(f) What is the marginal cost of the last book printed?

Solution: (a) Given x1 = 1000, x 2 = 2500, y1 = 7500, y 2 = 15000

Req equation of the linear relationship is


x  x1 y  y1

x1  x 2 y1  y 2
x  1000 y  7500
 
1000  2500 7500  15000
x  1000 y  7500
 
1 5
 y – 7500 = 5x – 5000
 y = 5x + 2500

(b) When x = 2000, variable cost = 5x = 5(2000) = 10000 (Ans)

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Linear Equations & Functions (Problem Set 1 – 4)
(c) Fixed cost = 2500 (Ans)

(d) When x = 2000, variable cost per book = 10000/2000 = 5 (Ans)

(e) When x = 2000,


total cost 5( 2000)  2500
Average cost per book =  = 6.25 (Ans)
no. of books 2000

(f) When x = last book, marginal cost = 5 (Ans)

14 If total factory cost, y, of making x units of a product is given by y


= 2x + 25:
(a) Graph the cost-units equation.
(b) Draw a line representing fixed cost on the graph for (a).
(c) Erect a vertical line at x = 10; intersecting the x-axis at R, the
fixed cost line at S, and the given equation at T.
(d) What are the numerical values and the interpretations of RS,
ST, and RT?
Solution:
(a), (b), (c) Given y = 2x + 25 T
For x-intercept, y = 0. y S
 y = 2x + 25 25
 o = 2x + 25
 x = - 12.5
For y-intercept, x = 0.
 y = 2x + 25 R
 y = 2(0) + 25 x′ - 12.5 0 x
 y = 25 Fig: Slope-intercept line

(d) RS = 25 = fixed cost.


ST = 2(10) = 20 = variable cost for 10 units.
RT = x(10) + 25 = 45 = total cost for 10 units.

15 In Figure A (on the text book page 52), the slant line represents
the relation between total factory cost, C, of producing a number of
units, and the number of units, Q, produced. What line segment(s),
or ratios thereof, represent:
(a) Fixed cost?
(b) Total cost if OA units are made?

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Bowen, Prichett & Saber’s Mathematics Manual
(c) Variable cost if OA units are made?
(d) Variable cost per unit made?
(e) Average cost per unit if OA units are made?
(f) Fixed cost per unit if OA units are made?
(g) How many more units can be made for AD dollars than for
AF dollars?
(h) Marginal cost?
Solution:
(a) Fixed cost = AB
(b) Total cost for OA units are made = AD
(c) Variable cost for OA units are made = BD
(d) Variable cost per unit made = BD/OA
(e) Average cost per unit for OA units are made = AD/OA
(f) Fixed cost for OA units are made = AB/OA
(g) Numbers of unit can be made for AD dollars than for AF dollars =
EB
(h) Marginal cost = BD/OA

16 Prior to making a number of units of a certain part, a machine


must be made ready, the cost incurred being called the setup cost.
The total machine shop cost, C, of making Q units of the part is
shown in Figure B (on the text book page 52) as the segment RS.
What interpretation would be given to:
(a) OR? (b) PN? (c) PN/OM? (d) MN/OM?

Solution:
(a) OR = Fixed cost.
(b) PN = Variable cost for OM units are made.
(c) PN/OM = Variable cost per unit.
(d) MN/OM = Average cost for OM units are made.

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