An Objective Function Reflects the Relevant Cost of Labor Hours

question 8

Multiple Choice

An objective function reflects the relevant cost of labor hours used in production rather than treating them as a sunk cost. The correct interpretation of the dual price associated with the labor hours constraint is

• A) the maximum premium (say for overtime) over the normal price that the company would be willing to pay.
• B) the upper limit on the total hourly wage the company would pay.
• C) the reduction in hours that could be sustained before the solution would change.
• D) the number of hours by which the right-hand side can change before there is a change in the solution point.

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Definitions:

Retailers

Businesses that sell goods directly to consumers.

Price Floor

A government-imposed minimum price set above the equilibrium price, intended to ensure fair conditions for producers.

Minimum Price

A price floor set by the government or a body, below which the product cannot be sold, aimed at protecting producers or farmers.

Government

is the system or group of people governing an organized community, often a state, which creates and enforces laws, regulates economic and social policies, and provides public services.