A shadow price reflects which of the following in a maximization problem?
A)The marginal cost of adding additional resources
B)The marginal gain in the objective value realized by adding one unit of a resource
C)The marginal loss in the objective value realized by adding one unit of a resource
D)The marginal gain in the objective value realized by subtracting one unit of a resource
E)None of the above

Question

A shadow price reflects which of the following in a maximization problem?
A)The marginal cost of adding additional resources 
B)The marginal gain in the objective value realized by adding one unit of a resource 
C)The marginal loss in the objective value realized by adding one unit of a resource 
D)The marginal gain in the objective value realized by subtracting one unit of a resource 
E)None of the above

Quizplus · Accepted Answer

A shadow price reflects the marginal gain in the objective value realized by adding one unit of a resource. It represents what the objective function would increase by if one unit of the resource were added to the problem. This is also known as the dual value or dual price.

A Shadow Price Reflects Which of the Following in a Maximization