A vendor offers 5 different prices per unit depending on the quantity purchased. How many binary variables are needed to model this discounting scheme?
A) 4
B) 2
C) 3
D) 5

Question

Quizplus · Accepted Answer

To model a scenario with 5 different prices (or options), you need 4 binary variables. This is because with n binary variables, you can represent 2^n different states or options. With 4 binary variables, you can represent 2^4 = 16 different states, which is more than enough to cover the 5 pricing options.

A Vendor Offers 5 Different Prices Per Unit Depending on the Quantity