Econ 162: Managerial Economics

Second Semester, AY 2023-24

Assignment 6: Goal Programming and Multiple Objective Optimization

Due on 17 April 2024.

I. Johannesburg Beer has allotted $10,000 for radio advertising in Gotham City and
must determine the placement of spot ads that will maximize increased sales. Top-40
stations attract a heavier beer-drinking audience than golden-oldie stations do, but top-40
stations also charge more for each spot. The following data apply.

Sales increase
Station Cost per spot per spot Spots available Format
KBAT 100 300 30 Top 40
WJOK 50 120 Unlimited Golden oldie
WROB 75 150 Unlimited Golden oldie
KPOW 150 400 40 Top 40
At least 25% of the spots must be placed with golden-oldie stations.
a) Determine the maximum increase in sales that the company can achieve.
b) How many spots will be bought from WROB station?
c) How much will be spent on spots bought from KPOW?

The following demographics apply to Johannesburg Beer’s radio advertising:

Female listeners Male listeners High income Low income
Station listeners listeners
KBAT 50,000 75,000 40,000 85,000
WJOK 15,000 10,000 20,000 5,000
WROB 23,000 19,000 5,000 37,000
KPOW 175,000 200,000 250,000 125,000
These are averages. Each category has an exposure goal. Exposure is the sum of the
products obtained by multiplying the number of listeners times the number of spots. The
following goals apply:
Goal 1: Female exposure should be at least 1,000,000.
Goal 2: Male exposure must not be greater than 500,000.
Goal 3: High-income exposure should be at least 1,500,000.
Goal 4: Low-income exposure should not exceed 500,000.
In achieving the goals, all of the original constraints must be satisfied. Violations of the
goals are equally serious, so that coefficients of 1 may be used on the applicable goal
deviation variables.
d) If the objective of maximizing sales increase were replaced by the above goals, how
much increase in sales could be achieved?
e) Which goal(s) could be satisfied?
f) Which goal(s) could not be met?
g) How many spots will be bought from WJOK?
h) How much will be spent on spots from KBAT?
Econ 162: Managerial Economics
Second Semester, AY 2023-24

II. Benjamin & Sons Manufacturing Company produces two goods that have the
following profit and resource requirement characteristics.
Characteristic Product x Product y
Profit/unit 4 2
Dept A hours/unit 1 1
Dept B hours/unit 2 5
Last month’s production schedule used 350 hours of labor in department A and 1,000 hours
of labor in department B.

Benjamin’s management has been experiencing workforce morale and labor union
problems during the past six months because of monthly departmental workload
fluctuations. New hiring, layoffs and interdepartmental transfers have been common
because the firm has not attempted to stabilize workload requirements.
Management would like to develop a production schedule for the coming month that will
achieve the following goals.
Goal 1: Use 350 hours of labor in department A.
Goal 2: Use 1,000 hours of labor in department B.
Goal 2: Earn a profit of at least 1,300.

a) Assume that goals 1 and 2 are equally important and goal 3 is considered least
important. Assume further that goal 1 is considered twice more important than goal
3. How much x and y should Benjamin produce?
b) Suppose that Benjamin ignores the workload fluctuations and considers the 350
hours in department A and the 1,000 hours in department B as the maximum
available. Solve a linear programming problem to maximize profit subject to these
constraints. How much x and y should he produce?
c) Reconsider the problem and assume that goals are listed in decreasing priority. Find
the optimal values of x and y using preemptive goal programming.
d) Compare the solutions in (a), (b) and (c) Which approach do you favor and why?

III. Virginia Tech operates its own power-generating plant. The electricity generated by
this plant supplies power to the university and to local businesses and residences in the
Blacksburg area. The plant burns three types of coal, which produce steam that drives the
turbines that generate the electricity. The Environmental Protection Agency (EPA) requires
that for each ton of coal burned, the emissions from the coal furnace smoke stacks contain
no more than 2,500 parts per million (ppm) of sulfur and no more than 2.8 kilograms (kg)
of coal dust. However, the managers of the plant are concerned about the environment and
want to keep these emissions to a minimum. The following table summarizes the amounts
of sulfur, coal dust, and steam caused by burning a ton of each type of coal.

Coal Sulfur (in ppm) Coal Dust (in kg) Steam (in lbs)
1 1,100 1.7 24,000
2 3,500 3.2 36,000
3 1,300 2.4 28,000

The three types of coal can be mixed and burned in any combination. The resulting emission
of sulfur or coal dust and the pounds of steam produced by any mixture are given as the
weighted average of the values shown in the table for each type of coal. For example, if the
Econ 162: Managerial Economics
Second Semester, AY 2023-24

coals are mixed to produce a blend that consisted of 35% of coal 1, 40% of coal 2, and 25%
of coal 3, the sulfur emission (in ppm) resulting from burning 1 ton of this blend is:
0.35*1,100 + 0.4*3,500 + 0.25*1,300 = 2,110.

The manager of this facility wants to select a blend of coal to burn while considering the
following objectives:

Objective 1: Maximize the pounds of steam produced

Objective 2: Minimize sulfur emissions.
Objective 3: Minimize coal dust emissions.

a) Formulate an MOLP model for this problem and implement your model.
b) Determine the best possible value for each objective in the problem.
c) Determine the solution that minimizes the maximum percentage deviation from the
optimal objective function values. What solution do you obtain?
d) Suppose management considers maximizing the amount of steam produced five
times as important as achieving the best possible values for the other objectives.
What solution does this suggest?