Question

A negative value for a given slack variable implies:

Select one:

a. no excess capacity.

b. use of more resources than are available.

c. none of the above.

d. excess capacity.

For costs to be a linear function of output:

Select one:

a. returns to each factor input must be constant.

b. input prices must change at a constant rate.

c. product prices must be constant.

d. returns to scale must be constant.

For managerial decision problems analyzed using the LP approach:

Select one:

a. some input costs must be fixed.

b. all input costs must be fixed.

c. increasing returns to scale must predominate.

d. returns to each factor input must be constant.

If QA > 0, then the marginal value of inputs employed:

Select one:

a. equals the marginal value of output.

b. is less than the marginal value of output.

c. equals current input prices.

d. exceeds the marginal value of output.

f slack exists in the solution of the primal LP, the dual shadow price variable is:

Select one:

a. zero.

b. positive.

c. negative.

d. none of these.

If the objective function is to maximize revenue subject to a binding labor constraint, then the shadow price of labor is:

Select one:

a. the marginal product of labor.

b. the marginal revenue product of labor.

c. negative.

d. zero.

Answer 1

1. The correct answer is: c)

Reason: A slack variable is always positive or equal to zero.

2. The correct answer is: d)

Reason: A constant returns to scale(CRS) production produces a linear cost curve.

3. The correct answer is: d)

Reason: Otherwise the LPP technique can't be applied to a non-linear case.

4. The correct answer is: a)

Reason: This goes by the output maximisation principle.

5. The correct answer is: b)

Reason: The dual of a slack in primal is positive.

6. The correct answer is: b)

Reason: This again goes by the Lagrange multiplier concept.

Thanks!