C Co uses material B, which has a current market price of $0·80 per kg. In a lin

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)

DStatement (ii) is wrong as it reflects the common misconception that the shadow price is the maximum price which should be paid, rather than the maximum extra over the current purchase price.Statement (iii) is wrong but could be thought to be correct if