Answered: According to Excel's sensitivity report…

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter16: Bargaining

Section: Chapter Questions

Problem 2MC

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Only need help with the shadow price for the capacity constraint

Transcribed Image Text:Betty Malloy, owner of the Eagle Tavern in Pittsburgh, is preparing for Super Bowl Sunday, and she must determine how much beer to stock. Betty stocks three brands of beer-Yodel, Shotz, and Rainwater. The cost per gallon (to the tavern owner) of each brand is shown in table below. The tavern has a budget of $2,000 for beer for Super Bowl Sunday. Betty sells Yodel at a rate of $3,00 per gallon, Shotz at $2.50 per gallon, and Rainwater at $1.75 per gallon. Based on past football games, Betty has determined the maximum customer demand to be 400 gallons of Yodel, 500 gallons of Shotz, and 300 gallons of Rainwater. The tavern has the capacity to stock 1,000 gallons of beer; Betty wants to stock up completely. Betty wants to decide on the number of gallons of each brand of beer to order so as to make the most profit. Formulate a linear programming model for this problem. Define x₁ as the number of gallons of Yodel to order, x2 as the number of gallons of Shotz to order, x3 as the number of gallons of Rainwater to order, and Z as the total profit. Which of the following model formulations is correct? Brand Cost/Gallon Yodel $1.50 Shotz 0.90 Rainwater 0.50

According to Excel's sensitivity report for the previous formulated model (Eagle Tavern), the shadow
price for the capacity constraint is
0 0
O 1.25
O 1.5
O 1.6

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According to Excel's sensitivity report for the previous formulated model (Eagle Tavern), the shadow price for the capacity constraint is 00 O 1.25