# 61154 - The Theory of Optimization Optimizing Theory deals...

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4.1 The Theory of Optimization Optimizing Theory deals with the task of finding the “best” outcome or alternative Maximums and Minimums What output will lead to maximum profit? What combination of inputs will lead to minimum cost of producing a given level of output?

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4.2 Concepts and Terminology The objective function is the function to be maximized or minimized. In many cases, our goal is to maximize profits. Therefore, the profit function would be the objective function.
4.3 Concepts and Terminology Activities or choice variables are the variables controlled by the decision-maker that influence the value of the objective function. For example, the manager can change the level of output and influence the level of profits. Choice variables can be continuous or discrete.

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4.4 Concepts and Terminology Optimization problems can be constrained or unconstrained . Unconstrained optimization problems allow the decision-maker to choose from an unrestricted set of values for the activity or choice variable. Constrained optimization problems allow the decision-maker to choose from a restricted set of values for the activity or choice variable.
4.5 Concepts and Terminology

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