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MC Question 8

C Co uses material B, which has a current market price of $0·80 per kg. In a linear program, where the objective is to maximise profit, the shadow price of material B is $2 per kg. The following statements have been made:

(i) Contribution will be increased by $2 for each additional kg of material B purchased at the current market price
(ii) The maximum price which should be paid for an additional kg of material B is $2
(iii) Contribution will be increased by $1·20 for each additional kg of material B purchased at the current market price
(iv) The maximum price which should be paid for an additional kg of material B is $2·80

Which of the above statements is/are correct?
A. (ii) only
B. (ii) and (iii)
C. (i) only
D. (i) and (iv)

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