Week 10: Absolute Extrema and

Applied Maxima and Minima

Goals:

• Review Absolute Extrema on a closed interval

• Discuss applications of derivative to Economics

Suggested Textbook Readings: Chapter 13: §13.2 and §13.6

Practice Problems

• §13.2: 3, 7, 11

• §13.6: 3, 9, 15, 19, 21, 25, 29, 33, 37, 41

• §13.7: 7, 11, 17, 23, 27, 33, 35, 49, 55, 61, 63, 67, 69
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Absolute Extrema
To prepare for this topic, please read section §13.2 in the textbook.
Optimization is the source of many applications of Calculus. What optimization involves
is finding the absolute maximum and the absolute minimum of a function. The following
theorem shows us a necessary condition for absolute extrema.
Extreme-Value Theorem
If a function is continuous on a closed interval, then the function has both a maximum
value and a minimum value on that interval.
Note that the statement may not be true if the given interval is not closed or the given
function is not a continuous function.

Example 1: Locate and classify all absolute extrema of the function over [a, b] in each
of the following graphs

y6 y6 y6

- - -
a b x a b x a b x
(a) (b) (c)

Locating candidates for absolute extrema

If f is a continuous function on a closed interval [a, b], then its absolute extrema occur
among the following types of points:

• critical points

• endpoints of the interval

Therefore the absolute maximum is the largest value in a table of values of f at the
endpoints and critical points, and the absolute minimum is the smallest value.

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Procedure for finding the absolute maximum and minimum of a function on

a interval [a, b]
To determine the absolute maximum and absolute minimum for a continuous function
on a closed interval [a, b], we need to

1. Find all critical points in (a, b).

2. Evaluate the function f (x) at all critical points and the two endpoints of the
interval.

3. The absolute maximum will be the critical point or end point with the largest
value, and

4. the absolute minimum will be the critical point or end point with the smallest
value.

[Textbook, page 580]

Example 2: (Example 1, page 580) Find the absolute max/min of f (x) = x2 −4x+5
over the interval [1, 4].

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Week 10: Applied Maxima and Minima 4

Applied Maxima and Minima

To prepare for this topic, please read section §13.6 in the textbook.
In many applications we would like to find the largest or smallest possible value of some
quantity, for instance, we would want to maximize the profit or minimize the cost. In
all applications the first step to solve such a problem is to translate the word description
into a mathematical model, and then use derivative calculations on explicit formulae to
find the optimum value.

Example 3: (Example 7 on page 604) An article in a sociology journal stated that

if a particular health-care program for the elderly were initiated, then t years after its
start, n thousand elderly people would receive direct benefits, where

t3
n= − 6t2 + 32t, 0 ≤ t ≤ 12
3
For what value of t does the maximum number receive benefits?

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Week 10: Applied Maxima and Minima 5

Example 4: For insurance purpose, a manufacturer plans to fence in a 10800 ft2 rect-
angular storage area adjacent to a building by using the building as one side of the
enclosed area. the fencing parallel to the building faces a highway and will cost $3 per
foot installed, whereas the fencing for the other two sides costs $2 per foot installed.
(a) [Example 1, page 599] Find the amount of each type of fence so that the total
cost of the fence will be a minimum. What is the minimum cost?

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Week 10: Applied Maxima and Minima 6

Example 4: continued
(b) Now suppose the fencing parallel to the highway will cost $8 per foot installed, whereas
the fencing for the other two sides costs $3 per foot installed. The distance from the
building to the highway is 100 ft. Find the amount of each type of fence so that the total
cost of the fence will be a minimum. What is the minimum cost?

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Week 10: Applied Maxima and Minima 7

Example 4: continued
(c) In (a) and (b) we got two different solutions: an intermediate optimum and an
endpoint solution. Now let $v per foot be the cost of the fence facing the highway and $w
v
per foot the cost of the other two sides. Clearly the ratio r = determines the optimum
w
option. Explore what values of ratio r give interior minimum and what values of r give
endpoint minimum.

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Week 10: Applied Maxima and Minima 8

Example 5: (Example 8 on page 605) Suppose that the demand equation for a mo-
nopolist’s product is p = 400 − 2q and the average cost function is
400
c̄ = 0.2q + 4 +
q
where q is number of units, and both p and c̄ are expressed in dollars per unit.
(a) Determine the level of output at which profit is maximized.

(b) Determine the price at which maximum profit occurs.

(c) Determine the maximum profit.

(d) If a tax of $22 per unit on the monopolist, what is the new price for profit maxi-
mization?

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Week 10: Applied Maxima and Minima 9

Example 6: Recall that the total profit function P is defined as P (x) = R(x) − C(x),
where R is the total revenue and C is the total cost when x units of product produced
and sold.
(a) Show that at the level of production x0 that yields the maximum profit for the com-
pany, the following two conditions are satisfied:

R0 (x0 ) = C 0 (x0 ) and R00 (x0 ) < C 00 (x0 )

(b) Interpret the two conditions in part (a) in economic terms and explain why they
make sense.

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Week 10: Applied Maxima and Minima 10

Example 7: The marginal revenue and marginal cost for a certain item are graphed
below. Do the following quantities maximize profit for the company?

$/unit
6 MC

MR

-
a b q

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Week 10: Applied Maxima and Minima 11

The economic lot size is the number of units of a product or item to be manufactured
at each setup or purchased on each order so as to minimize the cost of purchasing or
setup, and the cost of holding the average inventory over a given period.

Example 8: (Example 5 on page 602) A company annually products and sells 10000
units of a product. Sales are uniformly distributed throughout the year. The company
wishes to determine the number of units to be manufactured in each production run in
order to minimize total annual setup costs and carrying costs. The production cost of
each unit is $20, and carrying costs (insurance, storage, etc) are estimated to be 10%
of the value of the average inventory. Setup costs per production run are $40. Find the
economic lot size.

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Week 10: Applied Maxima and Minima 12

Next we look at some examples in which a function is given graphically and the optimum
values are read from a graph.

Optimization without formulae

Example 9: (December Exam 2004) You are starting your own business doing tu-
toring for high school kids. If you spend x dollars on advertising, the number of hours
H of business you receive is given by the graph below.

H 6
100 r
r
80
r
60
r
40
r
20
r r r r r r r - x
100 200 300 400 500 600
Suppose that you change $12 per hour.
(a) What is your profit function? How much should you spend on advertising to maxi-
mize your profit?

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Week 10: Applied Maxima and Minima 13

(b) Suppose a tax of 10% is applied on your revenue. How much should you spend on
advertising to maximize your profit?

H 6

100 r
r
80
r
60
r
40
r
20
r r r r r r r - x
100 200 300 400 500 600

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Week 10: Applied Maxima and Minima 14

Example 10: (December Exam 2004) Your scheme to raise money for the field trip
is to make scarves in the school colours and sell them to students. You intend to spend
the long weekend producing scarves of a fixed width. Your only cost is the wool at $4 per
meter of scarf length. The question is, how long should you make each scarf to maximize
your profit? The total number of meters you can produce is a fixed number L, so the
longer you make each scarf, the fewer scarves you will get, but the more you can sell
each scarf for. The following graph indicates the relationship between the length x of a
scarf (in meters) and its selling price S (in dollars). Note that no one will buy a scarf
less than 50 cm in length, and scarves that are too long are unwieldy.

S 6
s
25
s
20
s
15
s
10
s
5
s s s s - x
1 2 3
Assume you have no problem to sell all your scarves.
(a) Write an expression for your total profit function.

(b) Find a construction on the graph above which maximizes your profit.

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(c) Suppose you have to pay your school $5 per scarf sold for the use of the school colors,
and you decide to keep your price the same as before. What is your new profit function?
If you wish to maximize your profit, how long should you make each scarf ?

S 6
s
25
s
20
s
15
s
10
s
5
s s s s - x
1 2 3

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