The Shadow Price of a Nonbinding Constraint Is

question 40

Multiple Choice

The shadow price of a nonbinding constraint is:

• A) negative in value
• B) zero.
• C) a value between zero and one.
• D) proportionate to the amount of profit
• E) equal to the profit per unit of the decision variable concerned.

---

Definitions:

Total Variable Cost

The total of all costs that vary with output level in the short run.

Output

The total amount of goods or services produced by a company, industry, or economy within a specific period.

Total Cost

The aggregate cost of producing a given level of output, including both fixed and variable costs.

Output Level

The total quantity of goods or services produced by a firm or industry within a specific period.