MGE 8:30.docx - MGE 8/30 Choice Variables Activities or...

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MGE 8/30 Choice Variables - Activities or choice variables determine the value of the objective function - Discrete choice variables o Can only take specific integer values - Continuous choice variables o Can take any value between 2 end points Optimization Definitions - Unconstrained optimization o An optimization problem in which the decision maker can choose the level of activity from an unrestricted set of values - Constrained optimization o An optimization problem in which the decision maker chooses values for the choice variables from a restricted set of values - Maximization problem o An optimization problemthat involves maximizing the objective function - Minimization problem o An optimization problem that involves minimizing the objective function Net benefit = total benefit – total cost Marginal benefit = change in total benefit / change in units Marginal cost = change in tc/ change in units Net Benefit - Net benefit (NB) o Difference between total benefit (TB) and total cost (TC) for the activity o
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