Formulate but Do Not Solve the Following Exercise as a Linear

question 145

Multiple Choice

Formulate but do not solve the following exercise as a linear programming problem. Perth Mining Company operates two mines for the purpose of extracting gold and silver. The Saddle Mine costs $15,000/day to operate, and it yields 30 oz of gold and 3,000 oz of silver each day. The Horseshoe Mine costs $17,000/day to operate, and it yields 65 oz of gold and 1,000 oz of silver each day. Company management has set a target of at least 550 oz of gold and 17,000 oz of silver. How many days should each mine be operated so that the target can be met at a minimum cost?

• A) Minimize: Subject to:
• B) Minimize: Subject to:
• C) Minimize: Subject to:
• D) Minimize: Subject to:

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Definitions:

Allocative Efficiency

A state of the economy in which production represents consumer preferences; in other words, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it.

Long-Run

A period of time in economics during which all factors of production and costs are variable, allowing for complete adjustment to changes.

Average Total Cost

The sum of average variable costs and average fixed costs, or simply the total cost divided by the quantity of output produced.

Constant-Cost Industry

An industry in which the entry and exit of firms have no effect on the prices firms in the industry must pay for resources and thus no effect on production costs.