BUS461 quiz

1. 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? (Points : 1)