Max Rose Blog 3

Max Rose

Professor Little

March 30, 2015

MATH 211 MW

Part I: C

With all of the snow this past winter I decided to start my own snow removal Company with goal of helping people remove snow after snow storms.  The start up costs for my company included $500.00 for a snow shovel and a snow blower machine.  While the cost of completing one driveway cost my company about $20.00.  No matter the snows moisture or height I would charge a flat rate of $40.00 an hour to all customers to purchase my service. (Yes I could charge this because we got a ton of snow this year).

Part II:

Start up Cost = $450.00 for the Snow Blower Machine and $50.00 for a Snow Shovel.

Cost for producing one more unit= This would be the marginal cost and to find it I take the derivative of the cost function.  My cost for producing one more service is $20 an extra service.

Revenue= R(q)= 40q

Cost Function= C(q)= 500+20q

Revenue Function= R(q)= 40q

Profit Function= P(q)= R(q)- C(q)

Break Even Point= Point where cost function and revenue function intersect.  Important as this is where a business begins to make money R(q)=C(q).

Graph of All Functions and Break Even Point:

 Meaning of Break Even Point= The meaning of the break even point is that it displays the minimum amount of money the company must make in order for the company to remain in business.  Without breaking the break even point a company will have to change the way it conducts business or will go out of business.  The point where the cost and revenue are equivalent to one another.

­­­Graph of the Profit Function:

Meaning of Profit Function= This is the difference between the revenue and cost functions.  It displays how many units must be sold until my company begins to make money.

Part III:

(Work to help answer 1-5 Part III)

1.     Based on my graph my marginal revenues exceed my marginal costs making the marginal revenues greater than the marginal costs.  My company is no thus making money.

2.     Based on my graph I chose the number for my quantity to be 50.  While looking at this point on “Graph of All Functions and Break Even Point” making the number of daily units sold at 50 means that the company will operating a profit right away (the best kind of business).  The company will continue to grow.

3.     My company will continue to make money if my production is increased one more unit a day.  The marginal revenue at 50 units a day is exceeding the break even point so if my company can do one extra unit a day then we will be increasing our marginal revenue by $30.

4.     When q=n an increase of production increases the average cost of my company.

5.     A decreasing average cost is better for my company because the marginal costs are less than the average costs.  This keeps the factors of production lower, thus increasing the ability to maximize my profits. 

Part IV:

After looking at the charts above I believe the company will continue to make money even though it takes some time for profit to be obtained due to such large start up costs.  I company will struggle for a little while however; it will ultimately thrive because the fixed costs appear once.  Through the viewpoint of an economist,  in the long run the marginal costs will be less than the marginal benefits making the company a success.  Through the viewpoint of a potential user of the service the company may struggle because the companies success is based off of the amount of snow they get.  The business is seasonal and some potential buyers may be less interested in the product for the current prices with small amounts of snow.  All in all, there is a high likelihood of success.