A retailer is deciding how many units of a certain product to stock. The historical probability distribution of sales for this product is 0 units, 0.2; 1 unit, 0.3; 2 units, 0.4, and 3 units, 0.1. The product costs $8 per unit and sells for $33 per unit. What is the largest conditional value (profit) in the entire payoff table for this scenario?
A) $-24 profit
B) $42 profit
C) $9 profit
D) $51 profit
E) $75 profit

Question

Quizplus · Accepted Answer

The largest conditional value (profit) occurs when 3 units are stocked and sold. The profit is calculated as (3 units * $33 selling price) - (3 units * $8 cost) = $99 - $24 = $75.

A Retailer Is Deciding How Many Units of a Certain