6 Quadratic equations

Learning objectives
After completing this chapter students should be able to:
• Use factorization to solve quadratic equations with one unknown variable.
• Use the quadratic equation solution formula.
• Identify quadratic equations that cannot be solved.
• Set up and solve economic problems that involve quadratic functions.
• Construct a spreadsheet to plot quadratic and higher order polynomial functions.

6.1 Solving quadratic equations

A quadratic equation is one that can be written in the form

ax 2 + bx + c = 0

where x is an unknown variable and a, b and c are constant parameters with a != 0. For
example,

6x 2 + 2.5x + 7 = 0

A quadratic equation that includes terms in both x and x 2 cannot be rearranged to get a single
term in x, so we cannot use the method used to solve linear equations.
There are three possible methods one might try to use to solve for the unknown in a
quadratic equation:
(i) by plotting a graph
(ii) by factorization
(iii) using the quadratic ‘formula’
In the next three sections we shall see how each can be used to tackle the following question.
If a monopoly can face the linear demand schedule

p = 85 − 2q (1)

at what output will total revenue be 200?

© 1993, 2003 Mike Rosser

 It is not immediately obvious that this question involves a quadratic equation. We first need
to use economic analysis to set up the mathematical problem to be solved. By definition we
know that total revenue will be

TR = pq (2)

So, substituting the function for p from (1) into (2), we get

TR = (85 − 2q)q = 85q − 2q 2

This is a quadratic function that cannot be ‘solved’ as it stands. It just tells us the value of
TR for any given output. What the question asks is ‘at what value of q will this function be
equal to 200’? The mathematical problem is therefore to solve the quadratic equation

200 = 85q − 2q 2 (3)

All three solution methods require like terms to be brought together on one side of the equality
sign, leaving a zero on the other side. It is also necessary to put the terms in the order given
in the above definition of a quadratic equation, i.e.

unknown squared (q 2 ), unknown (q), constant

Thus (3) above can be rewritten as

2q 2 − 85q + 200 = 0

It is this quadratic equation that each of the three methods explained in the following sections
will be used to solve.
Before we run through these methods, however, you should note that an equation involving
terms in x 2 and a constant, but not x, can usually be solved by a simpler method. For example,
suppose that

5x 2 − 80 = 0

this can be rearranged to give

5x 2 = 80
x 2 = 16
x=4

6.2 Graphical solution

Drawing a graph of a quadratic function can be a long-winded and not very accurate process
that involves separately plotting each individual value of the variable within the range that is
being considered. It is therefore usually not a very practical method of solving a quadratic
equation. The graphical method can be useful, however, not so much for finding an approx-
imate value for the solution, but for explaining why certain quadratic equations do not have

© 1993, 2003 Mike Rosser

a solution whilst others have two solutions. Only a rough sketch diagram is necessary for this
purpose.

Example 6.1

Show graphically that a solution does exist for the quadratic equation

2q 2 − 85q + 200 = 0

Solution
We first need to define a new function

y = 2q 2 − 85q + 200

If the graph of this function cuts the q axis then y = 0 and we have a solution to the
quadratic equation specified in the question. Next, we calculate a few values of the function
to get an approximate idea of its shape.

When q = 0, then y = 200

When q = 1, then y = 2 − 85 + 200 = 117

and so the graph initially falls.

When q = 3, then y = 18 − 255 + 200 = −37

and so it must cut the q axis as y has gone from a positive to a negative value.

When q = 50 then y = 5,000 − 4,250 + 200 = 950

and so the value of y rises again and must cut the q axis a second time.
These values indicate that the graph is a U-shape, as shown in Figure 6.1. This cuts the
horizontal axis twice and so there are two values of q for which y is zero, which means that
there are two solutions to the question. The precise values of these solutions, 2.5 and 40, can
be found by the other two methods explained in the following sections or by computation of
y for different values of q. (See spreadsheet solution method below.)
If we slightly change the problem in Example 6.1 we can see why there may not always
be a solution to a quadratic equation.

Example 6.2

Find out if there is an output level at which total revenue is 1,500 for the function

TR = 85q − 2q 2

© 1993, 2003 Mike Rosser

 y

y = 2q2 – 85q + 200

550

200

–10 10 20 30 40 50 60 q

–700

Figure 6.1

Solution
The quadratic equation to be solved is

1,500 = 85q − 2q 2

which can be rewritten as

2q 2 − 85q + 1,500 = 0

If we now specify the new function

y = 2q 2 − 85q + 1,500

and calculate a few values, we can see that it falls and then rises again but never cuts the
q axis, as Figure 6.2 shows.

When q = 0, then y = 1,500

When q = 10, then y = 850
When q = 20, then y = 600
When q = 25, then y = 625

There are therefore no solutions to this quadratic equation, i.e. there is no output at which
total revenue will be 1,500.

© 1993, 2003 Mike Rosser

 y

y = 2q2 – 85q + 1,500

1,500

600

–10 10 20 30 40 50 60 q

Figure 6.2

Although one would never try to plot the whole graph of a quadratic function manually,
one may of course get a computer plot. The accuracy of the answer you obtain will depend
on the graphics package that you use.

Plotting quadratic functions with Excel

An Excel spreadsheet for calculating different values of the function y in Example 6.1 above
can be constructed by following the instructions in Table 6.1. Rather than building in formulae
that are specific to this example, this spreadsheet is constructed in a format that can be used
to plot any function in the form y = aq 2 + bq + c once the parameters a, b and c are entered
in the relevant cells. The range for q has been chosen to ensure that it includes the values
when y is zero, which is what we are interested in finding.
If you construct this spreadsheet you should get the series of values shown in Table 6.2.
The q values which correspond to a y value of zero can now be read off, giving the solutions
2.5 and 40.
You may also use the Excel spreadsheet you have created to plot a graph of the function
y = 2q 2 − 85q + 200. Assuming that you have q and y in single columns, then you just use
the Chart Wizard command to obtain a plot with q measured on the X axis and y as variable
A on the vertical axis. (It you don’t know how to use this chart command, refer back to
Example 4.17.) To make the chart clearer to read, enlarge it a bit by dragging the corner. The
legend box for y can also be cut out to allow the chart area to be enlarged. This should give
you a plot similar to Figure 6.3, which clearly shows how this function cuts the horizontal
axis twice.

© 1993, 2003 Mike Rosser

 Table 6.1

CELL Enter Explanation

A1 Ex.6.2 Label to remind you what example this is
B1 QUADRATIC SOLUTION TO Title of spreadsheet (Note that this label is
y = aq^2+bq+c = 0 not an actual Excel formula.)
B2 a= These are labels that tell you that the actual
D2 b= parameter values will go in the cells next
F2 c= to them. Right justify these labels.
C2 2 These are the actual parameter values for
E2 -85 this example.
G2 200
A4 q Column heading label
B4 y Column heading label
A5 0 Initial value for q
A6 =A5+0.5 Calculates a 0.5 unit increment in q
A7 to Copy formula from cell A6 Calculates a series of values of q in 0.5
A90 down column A unit increments
B5 =$C$2*A5^2+$E$2*A5+$G$2 This formula calculates the value of the
function corresponding to the value of q in
cell A5 and the parameter values in cells
C2, E2 and G2.
Note that the $ sign is used so that these
cell references do not change when this
function is copied down the y column.
B6 to Copy formula from cell B5 Calculates values for y in each row
B92 down column B corresponding to values of q in column A.

This spreadsheet can easily be amended to calculate values and plot graphs of other
quadratic functions by entering different values for the parameters a, b and c in cells C2,
E2 and G2. For example, to calculate values for the function from Example 6.2

y = 2q 2 − 85q + 1,500

the value in cell G2 should be changed to 1,500. A computer plot of this function should
produce the shape shown in Figure 6.2 above, confirming again that this function will not cut
the horizontal axis and that there is no solution to the quadratic equation

0 = 2q 2 − 85q + 1,500

6.3 Factorization
In Chapter 3 factorization was explained, i.e. how some expressions can be broken down into
terms which when multiplied together give the original expression. For example,

a 2 − 2ab + b2 = (a − b)(a − b)

If a quadratic function which has been rearranged to equal zero can be factorized in this way
then one or the other of the two factors must equal zero. (Remember that if A × B = 0 then
either A or B, or both, must be zero.)

© 1993, 2003 Mike Rosser

 Table 6.2
A B C D E F G H
1 Ex 6.2 QUADRATIC SOLUTION TO y = aq^2+bq+c = 0
2 a= 2 b= -85 c = 200
3 q y q y q y q y
4 0 200 11 -493 22 -702 33 -427
5 0.5 158 11.5 -513 22.5 -700 33.5 -403
6 1 117 12 -532 23 -697 34 -378
7 1.5 77 12.5 -550 23.5 -693 34.5 -352
8 2 38 13 -567 24 -688 35 -325
9 2.5 0 13.5 -583 24.5 -682 35.5 -297
10 3 -37 14 -598 25 -675 36 -268
11 3.5 -73 14.5 -612 25.5 -667 36.5 -238
12 4 -108 15 -625 26 -658 37 -207
13 4.5 -142 15.5 -637 26.5 -648 37.5 -175
14 5 -175 16 -648 27 -637 38 -142
15 5.5 -207 16.5 -658 27.5 -625 38.5 -108
16 6 -238 17 -667 28 -612 39 -73
17 6.5 -268 17.5 -675 28.5 -598 39.5 -37
18 7 -297 18 -682 29 -583 40 0
19 7.5 -325 18.5 -688 29.5 -567 40.5 38
20 8 -352 19 -693 30 -550 41 77
21 8.5 -378 19.5 -697 30.5 -532 41.5 117
22 9 -403 20 -700 31 -513 42 158
23 9.5 -427 20.5 -702 31.5 -493 42.5 200
24 10 -450 21 -703 32 -472 43 243
25 10.5 -472 21.5 -703 32.5 -450 43.5 287

Excel plot of function y = 2q^2 – 85q + 200

400

200

0
0 4 8 12 16 20 24 28 32 36 40
–200

–400

–600

–800
q

Figure 6.3

Example 6.3

Solve by factorization the quadratic equation

2q 2 − 85q + 200 = 0

© 1993, 2003 Mike Rosser

Solution
This expression can be factorized as

(2q − 5)(q − 40) = 2q 2 − 85q + 200

Therefore

(2q − 5)(q − 40) = 0

This means that

2q − 5 = 0 or q − 40 = 0

giving solutions

q = 2.5 or q = 40

As expected, these are the same solutions as those found by the graphical method.

It may be the case that mathematically a quadratic equation has one or more solutions with
a negative value that will not apply in an economic problem. One cannot have a negative
output, for example.

Example 6.4

Solve by factorization the quadratic equation

2x 2 − 6x − 20 = 0

Solution

By factorization (2x − 10)(x + 2) = 0

Therefore

2x − 10 = 0 or x + 2 = 0
x = 5 or x = −2

If x represented output, then x = 5 would be the only answer we would use.

If a quadratic equation cannot be factorized then the formula method in Section 6.5 below
must be used. The formula method can also be used, however, when an equation can be
factorized. Therefore, if you cannot quickly see a way of factorizing then you should use the
formula method. Factorization is only useful as a short-cut way of solving certain quadratic
equations. It defeats the object of the exercise if you spend half an hour trying to find a way
of factorizing an expression when it would be quicker to use the formula.
© 1993, 2003 Mike Rosser
 It should also go without saying that quadratic equations for which no solutions exist
cannot be factorized. For example, it is not possible to factorize the equation
2q 2 − 85q + 1,500 = 0
which we have already shown to have no solution.

Test Yourself, Exercise 6.1

1. Solve for x in the equation x 2 − 5x + 6 = 0.
2. Find the output at which total revenue is £600 if a firm’s demand schedule is

p = 70 − q

3. A firm faces the average cost function

AC = 40x −1 + 10x

where x is output. When will average cost be 40?

4. Is there a positive solution for x when

0 = 12x 2 + 90x − 48?

5. A firm faces the total cost schedule

TC = 6 − 2q + 2q 2

when q > 2. At what output level will TC = £150?

6.4 The quadratic formula

Any quadratic equation expressed in the form
ax 2 + bx + c = 0
where a, b and c are given parameters and for which a solution exists can be solved for x by
using the quadratic formula
√
−b ± b2 − 4ac
x=
2a
(The sign ± means + or −.) There is no need for you to understand how the formula is
derived. You just need to know that it works.

Example 6.5

Use the quadratic formula to solve the quadratic equation

2q 2 − 85q + 200 = 0

© 1993, 2003 Mike Rosser

Solution
In the quadratic formula applied to this example a = 2, b = −85 and c = 200 (and, of
course, x = q). Note that the minus signs for any negative coefficients must be included.
One also needs to take special care to remember to use the rules for arithmetic opera-
tions using negative numbers. Substituting these values for a, b and c into the formula
we get
!
−(−85) ± (−85)2 − 4 × 2 × 200
q=
2×2
√
85 ± 7,225 − 1,600
=
4
√
85 ± 5,625
=
4
85 ± 75 160 10
= = or = 40 or 2.5
4 4 4

These are, of course, the same as the solutions found by factorization in Example 6.3
above.

What happens if you try to use the quadratic formula when no solution exists? We can find
out by applying the formula to the quadratic equation in Example 6.2 above, where a sketch
graph showed that there was no solution.

Example 6.6

Use the quadratic formula to try to solve

2q 2 − 85q + 1,500 = 0

Solution
In this example a = 2, b = −85 and c = 1,500. Therefore
!
−(−85) ± (−85)2 − 4 × 2 × 1,500
q=
2×2
√
85 ±7,225 − 12,000
=
4
√
85 ± −4,775
=
4

We are now stuck! It is impossible to find the square root of a negative number. In other
words, no solution exists.
It will always be the case that the quadratic formula will require the square root of a negative
number if no solution exists.

© 1993, 2003 Mike Rosser

 Test Yourself, Exercise 6.2
(Use the quadratic formula to try to solve these problems.)
1. Solve for x if 0 = x 2 + 2.5x − 125.
2. A firm faces the demand schedule q = 400 − 2p − p 2 . What price does it need
to charge to sell 100 units?
3. If a firm’s demand function is p = 100 − q, what quantities need to be sold to
bring in a total revenue of

(a) £100 (b) £1,000 (c) £10,000?

(Give answers to 2 decimal places, where they exist.)

4. Make up your own quadratic equation and then find whether a solution exists.

6.5 Quadratic simultaneous equations

If one or more equations in a simultaneous equation system are quadratic then it may be
possible to eliminate all but one unknown and to reduce the problem to a single quadratic
equation. If this can be solved then the other unknowns can be found by substitution.

Example 6.7

Find the equilibrium values of p and q in a competitive market where the demand schedule is

p = 200q −1

and the supply function is

p = 30 + 2q

Solution
In equilibrium, demand price equals supply price. Therefore

200q −1 = 30 + 2q

Multiplying through by q,

200 = 30q + 2q 2
0 = 2q 2 + 30q − 200
0 = (2q − 10)(q + 20)

Therefore 2q − 10 = 0 or q + 20 = 0
q=5 or q = −20

© 1993, 2003 Mike Rosser

We can ignore the second solution as negative quantities cannot exist. Thus the equilibrium
quantity is 5.
Substituting this value into the supply function gives equilibrium price

p = 30 + 2 × 5 = 40

You should now be able to link the different mathematical techniques you have learned so far
to tackle more complex problems. If you have covered the theory of perfect competition in
your economics course, then you should be able to follow the analysis in the example below.

Example 6.8

An industry is made up of 100 firms, all with the cost schedules

AC = 40q −1 + 0.4q 2 TC = 40 + 0.4q 3 MC = 1.2q 2

They sell in a market where the demand schedule is

p = 70 − 0.08Q

where Q is industry output (and q is an individual firm’s output).

(i) What will be the short-run price, industry output and profit for each firm?
(ii) What will happen to price, industry output and the number of firms in the long run?
(Assume new entrants have the same cost structure.)

Solution
(i) The industry supply schedule is the horizontal sum of the individual firms’ marginal cost
schedules. Given the marginal cost function

MC = 1.2q 2
MC 0.5
" #
=q
1.2

There are 100 firms, and so the amount supplied by the whole industry is
#0.5
MC
"
Q = 100q = 100 (1)
1.2

In perfect competition MC corresponds to the price at which any given quantity will be
supplied, and so (1) can be rewritten as
$ p %0.5
Q = 100
1.2
© 1993, 2003 Mike Rosser
Therefore
$ p %0.5
0.01Q =
1.2
p
(0.01Q)2 =
1.2
p
0.0001Q2 =
1.2
0.00012Q2 = p (2)

The function (2) will be the industry supply schedule. The demand schedule given in the
question is

p = 70 − 0.08Q (3)

In equilibrium, demand price equals supply price. Thus equating (3) and (2) we get

70 − 0.08Q = 0.00012Q2
0 = 0.00012Q2 + 0.08Q − 70 (4)

Using the quadratic formula to solve (4)

√
−0.08 ± 0.0064 + 0.0336
Q=
0.00024
√
−0.08 ± 0.04
=
0.00024
−0.08 + 0.2 −0.08 − 0.2
= or
0.00024 0.00024
0.12 −0.28
= or
0.00024 0.00024
= 500 (ignoring the negative answer)

Substituting this value of Q into the demand schedule (3) gives

p = 70 − 0.08(500) = 70 − 40 = £30

Each of the 100 firms produces the same amount q. Therefore,

Q 500
q= = =5
100 100
Each firm’s profit will be

TR − TC = pq − (40 + 0.4q 3 )
= 30(5) − (40 + 50)
= 150 − 90 = £60

(ii) If existing firms are making a profit then in the long run new entrants will be attracted into
the industry. This will shift the supply schedule to the right and price will be driven down

© 1993, 2003 Mike Rosser

until each firm is only just breaking even, when price equals the lowest value on the firm’s
U-shaped average cost schedule.
How do we find when AC is at its minimum point? The MC and AC functions are given
in the question. From cost theory you should know that MC always cuts AC at its minimum
point. Therefore
MC = AC
1.2q 2 = 40q −1 + 0.4q 2
0.8q 2 = 40q −1
q 3 = 50
q = 3.684 (to 3 dp)
When q = 3.684, then
AC = 40q −1 + 0.4q 2
= 40(3.684)−1 + 0.4(3.684)2
= 16.2865
Therefore p = £16.29 (to the nearest penny)
The old supply schedule does not now apply because of the increased number of firms in the
industry. Therefore, substituting this price into the demand schedule (3) to get total output
gives
16.29 = 70 − 0.08Q
0.08Q = 53.71
Q = 671.375
We already know that each firm produces 3.684 units in long-run equilibrium. Therefore, the
new number of firms in the industry is
Q 671.375
= = 182.24 = 182 firms
q 3.684
Given that there were originally 100 firms, the number of new entrants is therefore 82. Note
that the fraction is rounded down to the nearest whole number. Any extra firms would bring
price below the break-even level.

Test Yourself, Exercise 6.3

1. If y = 255 − x − x 2 and y = 180 + (2/3)x 2 − 21x, find x and y.
2. Find x and y given the functions

2y + 4x 2 + 10x − 36 = 0

and

4y − 10x 2 + 24x = 24

© 1993, 2003 Mike Rosser

 3. A monopoly faces the marginal cost function MC = 0.5q 2
and the marginal revenue function MR = 200 − 4q
What output will maximize profits?
4. A price-discriminating monopoly sells in two markets whose demand schedules
are

p1 = 200 − 20q1 and p2 = 120 − 5q2

Total output q = q1 + q2 and the firm’s marginal cost schedule is

MC = 40 + 0.5q 2

How much should it sell in each market, and at what price, in order to maximize
profit?
5. A firm’s marginal cost schedule is MC = 2.3 + 0.00012q 2 and it sells its output
in two separate markets with demand schedules

p1 = 25 − 0.125q1 and p2 = 12 − 0.05q2

What prices and quantities will maximize profits if this firm is a price-
discriminating monopoly?

6.6 Polynomials
Quadratic equations are a special case of polynomial equations. The general format of a
polynomial function is

y = a0 + a1 x + a2 x 2 + a3 x 3 + · · · + an x n

where n is any non-negative integer. Linear equations contain polynomials where n = 1.

Quadratic equations contain polynomials where n = 2.
When n is greater than 2 the solution of a polynomial equation by algebraic means becomes
complex and time-consuming. For practical purposes, however, you may use a spreadsheet
to find a solution by the iterative method. This means calculating values of a function for
different values of the unknown variable until a solution or a good approximation to it is
found. As a spreadsheet can quickly perform the necessary calculations, it is an ideal tool for
the calculation of polynomial solutions.
The format of the spreadsheet will depend on the problem tackled. Below are some
examples of how problems can be approached.

Example 6.9

A firm’s total costs (TC) are given by the function

TC = 420 + 32.5q − 6.25q 2 + 0.8q 3

where q is output level and TC is measured in pounds. If the firm’s management is given a
budget of £43,000, what output can it produce?

© 1993, 2003 Mike Rosser

Solution
A spreadsheet needs to be constructed that will calculate TC for different values of q. You
can then experiment with different ranges of q until the solution is found.
The method for constructing the spreadsheet is basically the same as that used for quadratic
equations as set out in Table 6.1 earlier. This time the spreadsheet calculates the cubic TC
function that corresponds to the parameters entered. The instructions for doing this are set
out in Table 6.3.
Although AC and MC may initially fall as a firm’s output increases, its TC function should
never fall. It would therefore be useful to have a check that this cubic TC function always
increases as q increases and MC is never negative. To do this the spreadsheet also includes
a third column where values of MC are calculated. (See Section 8.4 for further analysis of
cubic functions with this property.)

Table 6.3
CELL Enter Explanation
A1 Ex.6.9 Label to remind you what example this is
B2 CUBIC POLYNOMIAL Title of spreadsheet
SOLUTION TO
B3 TC =a + bq + cq^2 + dq^3 (Note that this is not an actual Excel
formula.)
F2 Parameter Labels that tell you that the parameter values
F3 Values will be shown below
E4 a= These are labels that tell you that the
E5 b= parameter values will go in the cells next to
E6 c= them.
E7 d= Right justify these cells.
F4 420 These are the actual parameter values for
F5 32.5 a,b,c and d, respectively, for this example.
F6 -6.25
F7 0.8
A3 q Column heading labels
B3 TC
C3 MC
A4 0 Initial value for q
A5 =A4+1 Calculates a one unit increment in q
A6 to Copy formula from cell A5 Calculates a series of values of q in one unit
A45 down column A increments
B4 =F$4+F$5*A4+F$6*A4^2+ Formula to calculate value of TC
F$7*A4^3 corresponding to value of q in cell A4 and
parameter values in cells F4, F5, F6 and F7.
Note the $ sign used to anchor row
references for when this formula is copied
down row B.
B5 to Copy formula from cell B4 Calculates values for TC in each row
B45 down column B corresponding to values of q in column A.
C5 =B5-B4 Calculates values MC as the change in TC
from a one unit increment in q.
C6 to Copy formula from cell C5 Calculates MC of a unit of q corresponding
C45 down column C to increment in TC shown in column B.
B4 to Highlight these columns and TC and MC are both monetary values
C45 format to 2 decimal places measured in £ so use numerical format 0.00

© 1993, 2003 Mike Rosser

 Table 6.4
A B C D E F
1 Ex 6.9 CUBIC POLYNOMIAL SOLUTION TO
2 TC =a + bq + cq^2 + dq^3 Parameter
3 q TC MC Values
4 0 420.00 a= 420
5 1 447.05 27.05 b= 32.5
6 2 466.40 19.35 c= -6.25
7 3 482.85 16.45 d= 0.8
8 4 501.20 18.35
9 5 526.25 25.05
10 6 562.80 36.55
11 7 615.65 52.85
12 8 689.60 73.95
13 9 789.45 99.85
14 10 920.00 130.55
15 11 1086.05 166.05
16 12 1292.40 206.35
17 13 1543.85 251.45
18 14 1845.20 301.35
19 15 2201.25 356.05
20 16 2616.80 415.55
21 17 3096.65 479.85
22 18 3645.60 548.95
23 19 4268.45 622.85
24 20 4970.00 701.55
25 21 5755.05 785.05
26 22 6628.40 873.35
27 23 7594.85 966.45
28 24 8659.20 1064.35
29 25 9826.25 1167.05
30 26 11100.80 1274.55
31 27 12487.65 1386.85
32 28 13991.60 1503.95
33 29 15617.45 1625.85
34 30 17370.00 1752.55
35 31 19254.05 1884.05
36 32 21274.40 2020.35
37 33 23435.85 2161.45
38 34 25743.20 2307.35
39 35 28201.25 2458.05
40 36 30814.80 2613.55
41 37 33588.65 2773.85
42 38 36527.60 2938.95
43 39 39636.45 3108.85
44 40 42920.00 3283.55
45 41 46383.05 3463.05

Your spreadsheet should now look like Table 6.4, which shows that when q is 40, TC will
be 42,920. Thus, if output is constrained to whole units, 40 is the maximum output that the
firm’s management can produce for a budget of £43,000.
This spreadsheet also confirms that MC declines in value then increases, but is never
negative. This is what we would expect. Save your spreadsheet for use with other examples.
© 1993, 2003 Mike Rosser
 This example was constructed for a range of values of q that contained the answer we
were seeking. If you had no idea where the solution to this cubic polynomial lay then you
could get a ‘ball park’ estimate by producing a range of values in jumps of 10 in the column
headed q by entering the formula = A4 + 10 in cell A5 and then copying it down the column
for a few dozen rows. This would tell you that when q = 31, TC = £19,254.05, and when
q = 41, TC = £46,383.05. Therefore, TC = £43,000 must lie somewhere between these
values of q. Once you have a rough idea of where the solution value for q will lie, you can
change the q column so that values increase in only one unit increments, or smaller units if
necessary, until the actual solution is pinpointed.
To solve other cubic polynomials, one simply enters the corresponding parameters into the
spreadsheet set up for Example 6.9 above and adjusts the range of the independent variable
(q) until the solution is found.

Example 6.10

If TC = 880 + 72q − 14.5q 2 + 1.5q 3 , at what value of q will TC = £9,889?

Table 6.5
A B C D E F
1 Ex 6.10 CUBIC POLYNOMIAL SOLUTION TO
2 TC =a + bq + cq^2 + dq^3 Parameter
3 q TC MC Values
4 0 880.00 a= 880
5 1 939.00 59.00 b= 72
6 2 978.00 39.00 c= -14.5
7 3 1006.00 28.00 d= 1.5
8 4 1032.00 26.00
9 5 1065.00 33.00
10 6 1114.00 49.00
11 7 1188.00 74.00
12 8 1296.00 108.00
13 9 1447.00 151.00
14 10 1650.00 203.00
15 11 1914.00 264.00
16 12 2248.00 334.00
17 13 2661.00 413.00
18 14 3162.00 501.00
19 15 3760.00 598.00
20 16 4464.00 704.00
21 17 5283.00 819.00
22 18 6226.00 943.00
23 19 7302.00 1076.00
24 20 8520.00 1218.00
25 21 9889.00 1369.00
26 22 11418.00 1529.00

© 1993, 2003 Mike Rosser

Solution
Entering the new values for a, b, c and d into the spreadsheet constructed for Example 6.9
and adjusting the range of q, one should get a spreadsheet similar to Table 6.5. This shows
that q = 21 when TC = £9,889.

This spreadsheet can also be adjusted to cope with more complex polynomials. Its crucial
part is the formula in cell B4. This needs to be amended to calculate the value of the new
polynomial function if more terms are added. Note, however, that large polynomial equations
may have several solutions. In particular, if there are both positive and negative coefficients,
a polynomial function may equal zero at more than two values of the independent variable.
You can usually deduce the number of solutions from the format of the equation, or get a plot
from your spreadsheet to see how many times the function crosses the horizontal axis. On
the other hand, no solutions may exist, in which case a graph will not cut the axis; e.g. there
is no positive value of x which will satisfy the equation

0 = 8 + 32x + 6x 2 + 0.9x 3

although in this case there will be a negative solution.

Example 6.11

Assuming x < 1,000, is there a positive value of x that is a solution to the function

0 = −770,077.6 + 262x − 74x 2 + 12x 3 + 2x4 − 0.05x 5 ?

Solution
To solve this equation we need to calculate values of the polynomial function

y = −770,077.6 + 262x − 74x 2 + 12x 3 + 2x 4 − 0.05x 5

and find the value(s) of x where this function equals zero. To do this, call up the spreadsheet
created for Example 6.9 and then follow the instructions in Table 6.6 to add two new terms
so that it will be able to calculate values for polynomials in the format

y = a + bx + cx 2 + dx 3 + ex 4 + f x 5

Once the basic spreadsheet has been created, the ball-park method explained above can be
used to narrow down the possible solution range to between 30 and 40. This should give you
a spreadsheet that looks like Table 6.7. This clearly shows that y is zero when x is 38 and so
this is the solution. (If you try increasing the range of x you will see that there are no other
solutions in the range 0 < x < 1,000.)

© 1993, 2003 Mike Rosser

 Table 6.6
(Only shows changes needed to adapt Table 6.3 for this example.)
CELL Enter Explanation
A1 Ex.6.11 Label for example number
B2 y =a + bx + cx^2 + dq^3 + Title of new formula.
ex^4 + fx^5
E8 e = Additional labels for the two extra
E9 f = parameter values. (Right justify.)
A3 x New labels for column headings.
B3 y
Column Highlight and hit Edit-Clear- All This column can be cleared as MC not
C calculated for this example.
F4 -770077.6 These are the actual parameter values for
F5 262 a,b,c, d, e and f , respectively, for this
F6 -74 example.
F7 12
F8 2
F9 -0.05
A4 30 Initial value for x (Ball-park range found.)
Rows 15 Highlight-Edit-Delete Delete extra rows as only need range of x
onward from 30 to 40 for this example.
B4 =F$4+F$5*A4+F$6*A4^2+F$ Calculates the value of y function
7*A4^3+F$8*A4^4+F$9*A4^5 corresponding to value of x in cell A4 and
the parameter values in cells F4 to F9.
Note $ sign used to anchor row references.
B5 to Copy formula from cell B4 down Calculates values for y in each row
B14 column B corresponding to values of x in column A.

Table 6.7

A B C D E F
1 Ex 6.11 CUBIC POLYNOMIAL SOLUTION TO
2 y =a + bx + cx^2 + dq^3 + ex^4 + fx^5 Parameter
3 x y Values
4 30 -99817.60 a = -770077.6
5 31 -59993.15 b= 262
6 32 -24823.20 c= -74
7 33 4298.75 d= 12
8 34 25835.20 e= 2
9 35 38098.65 f= -0.05
10 36 39245.60
11 37 27270.55
12 38 0.00
13 39 -44913.55
14 40 -109997.60

© 1993, 2003 Mike Rosser

 Test Yourself, Exercise 6.4
(You will need to use a spreadsheet to tackle these questions.)
1. How much of q can be produced for £60,000 if the total cost function is

TC = 86 + 152q − 12q 2 + 0.6q 3 ?

2. What output can be produced for £150,000 if

TC = 130 + 62q − 3.5q 2 + 0.15q 3 ?

3. Solve for x when

0 = −1,340 + 14x + 2x 2 − 1.5x 3 + 0.2x 4 + 0.005x 5 − 0.0002x 6

© 1993, 2003 Mike Rosser