Asked by Jonathan Catano on Jun 06, 2024

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The shadow price ________.

A) tells how much the value of the allowable decrease will change as the right-hand side of a constraint is reduced to 0
B) tells how much the value of the allowable increase will change as the left-hand side of a constraint is reduced to 0
C) tells how much the value of the objective function will change as the right-hand side of a constraint is increased by 1
D) tells how much the objective coefficient needs to be reduced in order for a nonnegative variable that is zero in the optimal solution to become positive

Shadow Price

A monetary value assigned to currently unpriced goods or services, reflecting the opportunity cost of reallocating resources.

Objective Function

A mathematical function used in optimization to express the goal of the decision-making problem, often maximizing or minimizing some quantity.

Constraint

A Constraint refers to a limitation or restriction on the variables of an optimization problem, often defining the permissible solutions in mathematical modeling and decision-making processes.

  • Understand the concept of shadow prices and their relevance in sensitivity analysis.
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Nishant BhardwajJun 11, 2024
Final Answer :
C
Explanation :
The shadow price represents the rate at which the value of the objective function changes as the right-hand side of a constraint is increased by one unit, assuming all else remains constant.