Question 1

A negative value for a given slack variable implies:

Accepted Answer

A)  no excess capacity. 
B)  use of more resources than are available. 
C)  none of the above. 
D)  excess capacity. 
A)  no excess capacity. 
B)  use of more resources than are available. 
C)  none of the above. 
D)  excess capacity. B

Question 2

If a linear programming problem involves the minimization of advertising costs subject to audience marital status and income constraints, the objective function is:

Accepted Answer

A)  the marital status constraint. 
B)  the individual income constraint. 
C)  the advertising cost function. 
D)  none of these. 
A)  the marital status constraint. 
B)  the individual income constraint. 
C)  the advertising cost function. 
D)  none of these. C

Question 3

Unit costs are always constant if:

Accepted Answer

A)  input prices are constant. 
B)  the total cost function is linear. 
C)  constant returns to scale are operative. 
D)  input prices are constant and the total cost function is linear. 
A)  input prices are constant. 
B)  the total cost function is linear. 
C)  constant returns to scale are operative. 
D)  input prices are constant and the total cost function is linear. D

Question 4

Combinations of products that generate the same level of profit are shown graphically by:

Accepted Answer

A)  an isocost curve. 
B)  an isoprofit curve. 
C)  an isoquant curve. 
D)  a feasible space. 
A)  an isocost curve. 
B)  an isoprofit curve. 
C)  an isoquant curve. 
D)  a feasible space.

Question 5

When the costs of all inputs rise by a given percentage, the isocost line:

Accepted Answer

A)  slope decreases. 
B)  slope is unaffected. 
C)  and objective function intersection will be unaffected. 
D)  slope increases. 
A)  slope decreases. 
B)  slope is unaffected. 
C)  and objective function intersection will be unaffected. 
D)  slope increases.

Question 6

For costs to be a linear function of output:

Accepted Answer

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. 
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.

Question 7

When the objective function coincides with the boundary of the feasible space:

Accepted Answer

A)  an optimal solution cannot be determined. 
B)  there is only one optimal solution. 
C)  there are many possible optimal solutions. 
D)  an optimal solution does not exist. 
A)  an optimal solution cannot be determined. 
B)  there is only one optimal solution. 
C)  there are many possible optimal solutions. 
D)  an optimal solution does not exist.

Question 8

When the primal LP problem is to maximize revenue subject to various input constraints, the shadow prices of inputs in the dual constraints:

Accepted Answer

A)  equal the marginal revenue product of each input. 
B)  are positive for inputs with excess capacity. 
C)  equals zero for fully utilized inputs. 
D)  equal the marginal product of each input. 
A)  equal the marginal revenue product of each input. 
B)  are positive for inputs with excess capacity. 
C)  equals zero for fully utilized inputs. 
D)  equal the marginal product of each input.

Question 9

Slack variables:

Accepted Answer

A)  allow constraint equations to be expressed as inequalities. 
B)  measure excess capacity. 
C)  never equal zero. 
D)  in some cases have negative values. 
A)  allow constraint equations to be expressed as inequalities. 
B)  measure excess capacity. 
C)  never equal zero. 
D)  in some cases have negative values.

Question 10

If the capital slack variable = 0, then:

Accepted Answer

A)  the shadow price on capital is > 0. 
B)  the marginal product of capital = 0. 
C)  the marginal revenue product of capital = 0. 
D)  excess capital capacity exists. 
A)  the shadow price on capital is > 0. 
B)  the marginal product of capital = 0. 
C)  the marginal revenue product of capital = 0. 
D)  excess capital capacity exists.

Question 11

If X > 0 in the primal solution:

Accepted Answer

A) the marginal value of inputs just equals the marginal value of output in X production. B) the marginal value of inputs exceeds the marginal value of output in X production. C) LX > 0 in the dual solution. D) LX < 0 in the dual solution. A) the marginal value of inputs just equals the marginal value of output in X production. B) the marginal value of inputs exceeds the marginal value of output in X production. C) LX > 0 in the dual solution. D) LX < 0 in the dual solution.

Question 12

Constrained profit maximization requires:

Accepted Answer

A)  no excess capacity. 
B)  excess capacity. 
C)  a linear profit function. 
D)  constrained maximization of the total profit contribution. 
A)  no excess capacity. 
B)  excess capacity. 
C)  a linear profit function. 
D)  constrained maximization of the total profit contribution.

Question 13

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

Accepted Answer

A)  the marginal product of labor. 
B)  the marginal revenue product of labor. 
C)  negative. 
D)  zero. 
A)  the marginal product of labor. 
B)  the marginal revenue product of labor. 
C)  negative. 
D)  zero.

Question 14

Fixed Input Relations. Extreme Biking, Inc., assembles high-end extreme mountain bicycles at a plant in Lexington, Massachusetts. The plant uses labor (L) and capital (K) in an assembly line process to produce output (Q) where:
  
A. Calculate how many units of output can be produced with 25 units of labor and 400 units of capital, and with 225 units of labor and 3,600 units of capital. Are returns to scale increasing, constant, or diminishing?
B. Calculate the change in the marginal product of labor as labor grows from 25 to 36 units, holding capital constant at 400 units. Similarly, calculate the change in the marginal product of capital as capital grows from 400 to 625 units, holding labor constant at 25 units. Are returns to each factor increasing, constant, or diminishing?
C. Assume now and throughout the remainder of the problem that labor and capital must be combined in the ratio 25L:400K. How much output could be produced if the company faces a constraint of L = 25,000 and K = 500,000 during the coming production period?
D. What are the marginal products of each factor under the conditions described in part C?

Accepted Answer

The answer of Fixed Input Relations. Extreme Biking, Inc., assembles...

Question 15

LP Basics. Indicate whether each of the following statements is true or false and why.
A. In profit maximization linear programming problems, negative values for slack variables are impossible.
B. Binding constraints indicate positive slack variables at the optimum solution.
C. Points not on process rays represent unattainable technologies.
D. Constant input prices is the only requirement for a total cost function to be linear.
E. Changing input prices will not alter the slope of a given isoquant line.

Accepted Answer

A. True. Slack variables can never take

Question 16

When some capacity constraints are binding, although others are nonbinding:

Accepted Answer

A)  the shadow price for new capacity is positive. 
B)  the shadow price for output is positive. 
C)  the marginal revenue product for new capacity is positive. 
D)  the marginal product of new capacity is positive. 
A)  the shadow price for new capacity is positive. 
B)  the shadow price for output is positive. 
C)  the marginal revenue product for new capacity is positive. 
D)  the marginal product of new capacity is positive.

Question 17

To determine the quantity to be produced by each production process at varying points along an isoquant, managers could use:

Accepted Answer

A)  the point-slope method. 
B)  slack variable method. 
C)  the relative distance method. 
D)  the relative cost method. 
A)  the point-slope method. 
B)  slack variable method. 
C)  the relative distance method. 
D)  the relative cost method.

Question 18

The cost of capacity subject to constraints is:

Accepted Answer

A)  variable. 
B)  sunk. 
C)  semi-variable. 
D)  nonzero. 
A)  variable. 
B)  sunk. 
C)  semi-variable. 
D)  nonzero.

Question 19

Linear programming is an analytical technique used to:

Accepted Answer

A)  solve constrained optimization problems. 
B)  project trends. 
C)  increase worker productivity. 
D)  estimate linear demand functions. 
A)  solve constrained optimization problems. 
B)  project trends. 
C)  increase worker productivity. 
D)  estimate linear demand functions.

Question 20

Profit contribution equals total:

Accepted Answer

A)  revenue minus variable cost. 
B)  revenue minus fixed cost. 
C)  profit. 
D)  revenue minus total cost. 
A)  revenue minus variable cost. 
B)  revenue minus fixed cost. 
C)  profit. 
D)  revenue minus total cost.

A negative value for a given slack variable implies:

If a linear programming problem involves the minimization of advertising costs subject to audience marital status and income constraints, the objective function is:

Unit costs are always constant if:

Combinations of products that generate the same level of profit are shown graphically by:

When the costs of all inputs rise by a given percentage, the isocost line:

For costs to be a linear function of output:

When the objective function coincides with the boundary of the feasible space:

When the primal LP problem is to maximize revenue subject to various input constraints, the shadow prices of inputs in the dual constraints:

Slack variables:

If the capital slack variable = 0, then:

If X > 0 in the primal solution:

Constrained profit maximization requires:

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

When some capacity constraints are binding, although others are nonbinding:

To determine the quantity to be produced by each production process at varying points along an isoquant, managers could use:

The cost of capacity subject to constraints is:

Linear programming is an analytical technique used to:

Profit contribution equals total:

Nature and Scope of Managerial Economics

Economic Optimization

Demand and Supply

Demand Analysis

Demand Estimation

Forecasting

Production Analysis and Compensation Policy

Cost Analysis and Estimation

Competitive Markets

Performance and Strategy in Competitive Markets

Monopoly and Monopsony

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Pricing Practices

Risk Analysis

Capital Budgeting

Organization Structure and Corporate Governance

Government in the Market Economy

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Exam 9: Linear Programming

A negative value for a given slack variable implies:

If a linear programming problem involves the minimization of advertising costs subject to audience marital status and income constraints, the objective function is:

Unit costs are always constant if:

Combinations of products that generate the same level of profit are shown graphically by:

When the costs of all inputs rise by a given percentage, the isocost line:

For costs to be a linear function of output:

When the objective function coincides with the boundary of the feasible space:

When the primal LP problem is to maximize revenue subject to various input constraints, the shadow prices of inputs in the dual constraints:

Slack variables:

If the capital slack variable = 0, then:

If X > 0 in the primal solution:

Constrained profit maximization requires:

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

When some capacity constraints are binding, although others are nonbinding:

To determine the quantity to be produced by each production process at varying points along an isoquant, managers could use:

The cost of capacity subject to constraints is:

Linear programming is an analytical technique used to:

Profit contribution equals total:

Nature and Scope of Managerial Economics

Economic Optimization

Demand and Supply

Demand Analysis

Demand Estimation

Forecasting

Production Analysis and Compensation Policy

Cost Analysis and Estimation

Competitive Markets

Performance and Strategy in Competitive Markets

Monopoly and Monopsony

Monopolistic Competition and Oligopoly

Game Theory and Competitive Strategy

Pricing Practices

Risk Analysis

Capital Budgeting

Organization Structure and Corporate Governance

Government in the Market Economy

Filters