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Lagrangian Multipliers

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Fixed capital and labor expenses are $1.2 million per year.
Variable expenses average $2,000 per van conversion.
Q=1,000 - 0.1P where Q is the number of van conversions (output) and P is price.
Calculate the profit maximizing output, price and profit levels.

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Fixed cost = 1,200,000
Unit Variable cost = 2000
So the cost function is TC = FC + VC = 1200,000 + 2000 Q
Then marginal cost = AVC = 2000

Since Demand is Q ...

Solution Summary

Calculate the profit maximizing output, price and profit levels.

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Lagrange multipliers method

Considering the surface f(x,y)=xy and the constraint x2+y2=1 , answer to the following questions:

A. Using the Lagrange multipliers method we can obtain some possible maximum and minimum for ?=ï?±1/2
B. The Lagrange multipliers method is the most convenient
C. There are two absolute maximum and two absolute minimum
D. There is only one absolute maximum and one absolute maximum

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