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Unformatted text preview: AMS 341 Spring, 2011 Homework Set # 5 Solution Notes #5, Ch. 5 Review: a45 a54 Corn Hops Malt BEER ( 40 3 , 40 3 ) ALE Let P a = price of ale and P b = price of beer (a) Current basis remains optimal if the slope of the isoprofit line is between malt and corn constraints, therefore- 2 - P a 50 - . 5 or 25 P a 100. (b)- 2 - 40 P b - . 5 or 20 P b 80. (c)Optimal solution is where the corn and malt constraints are binding. If we change amount of available corn we lose feasibility if corn constraint moves below (20 , 0) (20 bushels of corn) or move beyond hops-malt intersection (10 , 20) (50 bushels of corn). Thus current basis remains optimal if 20 corn availability 50. If 40 + bushels of corn are available, then the new is where ALE+2BEER 40+ and 2ALE+BEER=40, where z = 1200 + 20. Thus corn shadow price is $20. (d) The shadow price of hops is $0....
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- Spring '08