| Can somebody tell me what I did wrong in this financial mathematics problem? A Real estate office manages 50 apartments in a downtown building. When the rent is $900 per month, all the units are occupied. For every $25 increase in rent, one unit becomes vacant. On average, each unit requires $75 in maintenance and repairs each month. How much rent should the real estate office charge to maximize profits?
I determined the cost function to be:
C(x) = 75(50) = 3750 (cause you have to pay for maintenance no matter what)
I determined the revenue function to be:
R(x) = (50-x)(900+25x)
When maximizing profit (P(x) = R(x) - C(x)) using a derivative, I get an x value of 7, meaning the rent should be $1075 to max out profit.
My answer sheet says otherwise: $1100 or $1125
Apparently, according to an answerer before, my cost function is wrong. I'm only asking this question again because I really need to fix it quick! Can someone PLEASE tell me what I did wrong?
My Answer: $ 1075
Sheet Answer: $ 1100 or $1125
Thanks James! I at least know that unused apartments aren't payed for in terms of maintenance. That still doesn't help me in figuring out this freakin cost function though. All I know is that it must be a third degree polynomial because that is the only way that the answer could possibly have two answers. |