The amount by which an objective function coefficient would have to improve before it would be possible for the corresponding variable to assume a positive value in the optimal solution is called the
A)reduced cost.
B)relevant cost.
C)sunk cost.
D)dual price.

Question

Quizplus · Accepted Answer

The reduced cost represents the amount by which the objective function coefficient would have to improve before the corresponding variable could assume a positive value in the optimal solution. If the reduced cost is negative, then the corresponding variable is currently at its lower bound in the optimal solution. If the reduced cost is positive, then the corresponding variable would need to become more profitable (or less costly) before it could be included in the optimal solution. Therefore, A is the best choice. Relevant cost refers to a cost that is pertinent to a particular decision, sunk cost is a cost that has already been incurred and cannot be recovered, and dual price refers to the marginal value of a resource in the optimal solution. None of these choices accurately describe the concept defined in the question.

The Amount by Which an Objective Function Coefficient Would Have