# Ms 6000 Final

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• Published : May 6, 2012

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Question 1

When we are attempting to make a business decision, the decision criteria should always be to minimize cost. Answer
Question 2

EVSI can never exceed EVPI
Question 3

You are currently paying \$12 per hour for labor, and labor costs are included in the calculation of the objective function coefficients of a maximization problem. The shadow price for labor printed on the sensitivity analysis report is \$8. It would be economically beneficial to you if you could secure extra labor for \$15 per hour. Answer

Question 4

If project 1 is performed then project 2 will not be performed. This can be modeled by the constraint X1 – X2 ≤ 1, where X1 and X2 are binary variables.
Question 5

Monte Carlo simulations are deterministic.
Question 6

In constructing a utility curve,
the certainty of a certain amount is compared with the willingness to gamble that amount on a larger amount. Question 7

Banner Tools produces two styles of steel hammers with wooden handles. The first sells for \$6 and consists of .5 pounds of steel; the second sells for \$15 and consists of 1 pound of steel. Since steel costs the firm \$4 per pound and the handle, labor, and packaging costs amount to \$1 for either hammer, the profits coefficients are \$6 - .5(\$4) - \$1 = \$3 for the smaller hammer and \$15 – 1(\$4) - \$1 = \$10 for the larger hammer. Thus the objective function for this model is MAX 3X1 + 10X2. Given that the shadow price for steel is \$2, which of the following statements is correct? Answer

Banner should buy at least as much as the “ALLOWABLE INCREASE”, but only if it can be purchase for less than \$6 per pound. Question 8

Nike may build a factory at Millville (Y1) or it may not. It may also build a regional warehouse at the same site (W1). But Nike will not build a warehouse without also building a factory. So, its choices are: (1) neither factory nor warehouse; (2) factory only; or (3) factory and warehouse. The appropriate linear constraint to express this is: Answer

Y1 – W1 ≥ 0
Question 9

In sensitivity analysis, a zero shadow price for a resource ordinarily means that Answer
the resource has not been used up
Question 10

Which of the following would not generally be listed as a reason for the popularity of simulation as a managerial tool? Answer