A Shadow Price Reflects Which of the Following in a Maximization

question 38

Multiple Choice

A shadow price reflects which of the following in a maximization problem?

• A)marginal cost of adding additional resources
• B)marginal gain in the objective that would be realized by adding one unit of a resource
• C)net gain in the objective that would be realized by increasing an objective function coefficient
• D)marginal gain in the objective that would be realized by subtracting one unit of a resource
• E)expected value of perfect information

Understand the definition and implications of substitutes and complements in consumer choice.

Grasp the significance of price elasticity of demand and the factors determining it.

Understand the pay-as-you-go principle of the U.S. Social Security system.

Recognize the impact of demographic conditions on the Social Security system.

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Definitions:

Total Utility

The entire pleasure derived from using a certain aggregate quantity of a good or service.

Consumer Surplus

The difference between the maximum price consumers are willing to pay for a good or service and the actual price they do pay.

Marginal Utility

The additional satisfaction or utility gained from consuming one more unit of a good or service.

Total Utility

The total satisfaction received from consuming a certain amount of goods or services.