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Question 136 of 160

Q.A telephone company in a town has 5000 subscribers on its list and collects fixed rent charges of ₹3,000 per year from each subscriber. The company proposes to increase annual rent and it is believed that for every increase of one rupee in the rent, one subscriber will be discontinued. Find what increased annual rent will bring the maximum annual income to the company.

Maharashtra MsbshseMaharashtra HSC (MSBSHSE) Board 2017Subjective· 4mImportance★★★★★
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Model income as a function of the increase xx, maximize using R′(x)=0R'(x)=0 and the second derivative test.

Let xx = increase in annual rent (in ₹). New rent per subscriber =(3000+x)= (3000+x), and number of subscribers =(5000−x)= (5000-x) (one subscriber lost per ₹1 increase).

Total income: R(x)=(3000+x)(5000−x)=1,50,00,000+2000x−x2R(x) = (3000+x)(5000-x) = 1{,}50{,}00{,}000 + 2000x - x^2

R′(x)=2000−2xR'(x) = 2000 - 2x

Setting R′(x)=0R'(x)=0: 2000−2x=0⇒x=10002000-2x=0 \Rightarrow x = 1000

R′′(x)=−2<0R''(x) = -2 < 0

Since R′′(x)<0R''(x)<0, R(x)R(x) is maximum at x=1000x=1000.

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