1 Arnold takes special steroids to build muscle The ounces o

1. Arnold takes special steroids to build muscle. The ounces of muscle built per year (Q) is:

Q = 5 + 61 S –S²

where   Q = the ounces of muscle built per year

                  S = ounces of steroid used

Steroids costs $300 per ounce. Arnold is paid by a promoter $20 for each ounce of muscle built. He also spends $400 per week in food.

Show your work/thought process:

What is the optimal amount of steroids (S) to purchase?

Given your answer in part a, what is the total amount of muscle that Arnold will build?

Solution

Decision rule:

Marginal revenue product of labour = Marginal cost of labor

MRPL = MCL

First lets estimate MRPL

MRPL = Marginal revenue * MPL = $20 * (61-2S) = 1220- 40S

now

MCL = 300

So

1220-40s=300

40S = 920

S=23 is the optimal amount

Muscle built will be calculated by putting S=23 in equation

ounces of muscle built = 5+61*23-(23)^2 = 879

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