A question related to mathematical economics.

fullzeka

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x shows the amount of goods and this is the total cost function :
redditsoru.jpg
What is the produce amount that minimises the cost? / What is the produce amount while the cost is minimum ? (Whichever is more understandable)

Translating terms is quiet hard.I hope the question is clear.

I have tried finding AC(x) and AC'(x) but couldn't get the right answer i believe.

Thanks for your help.
 
x shows the amount of goods and this is the total cost function:
TC(x) = 250 +(x^2 - 62x)/100

What is the [production] amount that minimises the cost? …

Hi fullzeka. That's a quadratic polynomial (on the right-hand side, above). The minimum value of TC(x) is at the parabola's vertex.

Given f(x) = Ax^2 + Bx + C, the vertex point is at x = -B/(2A)

Alternately, you may set the first derivative of TC(x) equal to zero and solve for x.

I have tried finding AC(x) and AC'(x) …
What does AC(x) represent?

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Hi fullzeka. That's a quadratic polynomial (on the right-hand side, above). The minimum value of TC(x) is at the parabola's vertex.

Given f(x) = Ax^2 + Bx + C, the vertex point is at x = -B/(2A)

Alternately, you may set the first derivative of TC(x) equal to zero and solve for x.


What does AC(x) represent?

?
AC(x) almost undoubtedly means average cost per unit produced (or sold). Economists have their own weird notation. Having studied a fair amount of economics, I call it "fake math." The most honest description of modern economics I know came from Samuelson who called it a "qualitative calculus," already a contradiction in terms, where its acolytes hope with scant empirical evidence that most of the immense number of partial derivatives involved are both approximately zero and symmetrically distributed as to sign so virtually all of the partials (usually all but one or two) can be ignored.

I am going to think about the problem, but please do not scramble your brains trying to comprehend economists' notation where MC(x) = TC'(x), and neither M nor T is a coefficient and AC(x) is TC(x)/x if x > 0, and A is not a coefficient. A, M, and T are adjectives.
 
Hi fullzeka. That's a quadratic polynomial (on the right-hand side, above). The minimum value of TC(x) is at the parabola's vertex.

Given f(x) = Ax^2 + Bx + C, the vertex point is at x = -B/(2A)

Alternately, you may set the first derivative of TC(x) equal to zero and solve for x.


What does AC(x) represent?

?

AC is average cost as JeffM also said :)
1591349818719.png

Do you think this is the correct answer ?
 
I cannot tell whether the problem is badly stated in the original language or the translation loses much of the original meaning. Here is what I think the problem is if stated in English comprehensible to English-speaking mathematicians.

[MATH]\text {If aggregate cost (total cost) is a}\\ \text {function of number of units produced such that }\\ c(x) = 250 + \dfrac{x^2 - 62x}{100},\\ \text { where } c(x) = \text {total cost, and } x = \text {units produced},\\ \text {what number of units minimizes average cost?}[/MATH]If that is what the problem is, then the preceding answer is wrong. Of course, I may be guessing wrong about the problem. The preceding answer determines the quantity at which what economists call marginal cost is zero.

[MATH]c'(x) = \dfrac{2x - 62}{100} \implies c'(x) = 0 \iff x = 31.[/MATH]
But if the question is about average cost, that is a different function altogether

[MATH]a(x) = \text {average cost per unit produced} \implies\\ a(x) = \dfrac{c(x)}{x} = \dfrac{250}{x} + \dfrac{x}{100} - 0.62.[/MATH]What is the first derivative of that, and where is it equal to zero?

It is difficult to answer this question because the translation difficulties mean I am not sure what the problem really is.
 
To supplement my previous answer, you should think about what it means economically for a cost function's derivative to have a root.

Mathematically, it means that aggregate costs are falling at quantities less than that root. Let's test that.

[MATH]c(10) = 250 + \dfrac{10^2 - 62(10)}{100} = 250 - \dfrac{520}{100} = 244.8.[/MATH]
[MATH]c(20) = 250 + \dfrac{20^2 - 62(20)}{100} = 250 - \dfrac{-840}{100} = 241.6 < 244.8.[/MATH]
Let's look at that first derivative you calculated, the marginal cost.

[MATH]c'(x) = \dfrac{x - 31}{50} \implies\\ c'(10) = \dfrac{10 - 31}{100} < 0 > \dfrac{20 - 31}{100} = c'(20).[/MATH]But economically, at least if the producer is a price taker rather than a price maker, then, at any level of production where marginal cost is negative (meaning total cost is falling) the producer necessarily increases revenue by making and selling more product while actually reducing costs. Expanding production when marginal costs are negative necessarily increases the profits of a price taker: revenues go up while expenses go down. Thus, a price taker would be stupid as a stone not to expand production AT LEAST to where marginal cost is zero. In fact there is a fundamental theorem in the theory of the firm that, to maximize profits, a producer should increase production to the point where total costs are increasing and also the marginal cost equals price. (That theorem has implications for a price maker that do not apply to a price taker.)

So the number that you calculated has economic significance, but I do not think it was what was being looked for.
 
… correct answer ?
I forgot to include an easy verification (for x=31) that I'd intended to show. Here it is.

The x-coordinate of the vertex is -B/(2A) when y=Ax2+Bx+C

\[y = \frac{1}{100}x^2 - \frac{31}{50}x + 250\]

\[x = -\left( \frac{-31}{\cancel{50}_1} \right) \left( \frac{\cancel{100}^2}{2} \right) = 31\]

xVert.JPG

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