In a fixed-cost model, each fixed cost is associated with a binary variable and a specification of the
A)upper bound for the corresponding production variable.
B)upper bound for each of the binary variable.
C)integer constraints involving the corresponding production variables.
D)objective function involving these binary variables only.

Question

Quizplus · Accepted Answer

In a fixed-cost model, each fixed cost is associated with a binary variable and an upper bound for the corresponding production variable. This is because the fixed cost is incurred regardless of the level of production, and the binary variable indicates whether or not the cost will be incurred. The upper bound on the production variable limits how much the company can produce, and therefore how much of the fixed cost will be incurred. The other options (B, C, D) are not directly related to fixed-cost models.

In a Fixed-Cost Model, Each Fixed Cost Is Associated with a Binary