Management believes that by advertising the demand for car rentals in location 3 can increase by 2. What is the maximum management should be willing to pay for the advertising campaign? Choose the correct answer: a. This is a model about transportation cost. The model does not give any informatior to help you decide about advertisement. b. Since the shadow price is -200, it has a negative effect on the objective function. Do not advertise. c. Since the combination of demand increase and shadow price is (-200)*2 = -400, it falls below the allowable increase of constraint 1. This means that we can use the shadow price. d. The demand increase falls below the allowable increase of constraint 1. Use the shadow price; do not invest more than $400 in advertisement.
Management believes that by advertising the demand for car rentals in location 3 can increase by 2. What is the maximum management should be willing to pay for the advertising campaign? Choose the correct answer: a. This is a model about transportation cost. The model does not give any informatior to help you decide about advertisement. b. Since the shadow price is -200, it has a negative effect on the objective function. Do not advertise. c. Since the combination of demand increase and shadow price is (-200)*2 = -400, it falls below the allowable increase of constraint 1. This means that we can use the shadow price. d. The demand increase falls below the allowable increase of constraint 1. Use the shadow price; do not invest more than $400 in advertisement.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Management believes that by advertising the demand for car rentals in location 3 can
increase by 2. What is the maximum management should be willing to pay for the
advertising campaign? Choose the correct answer:
a. This is a model about transportation cost. The model does not give any informatior
to help you decide about advertisement.
b. Since the shadow price is -200, it has a negative effect on the objective function. Do
not advertise.
c. Since the combination of demand increase and shadow price is (-200)*2 = -400, it
falls below the allowable increase of constraint 1. This means that we can use the
shadow price.
d. The demand increase falls below the allowable increase of constraint 1. Use the
shadow price; do not invest more than $400 in advertisement.
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