A bakery makes fresh donuts every morning.If any are left at the end of the day they are donated to a homeless shelter.The number of donuts that can be sold each day is uncertain and the bakery must decide early each morning,how many donuts to make that day.The bakery has created the following payoff table to summarize the situation. It estimates the following probabilities for the respective levels of demand. If the bakery had perfect information about that day's demand,the expected value under certainty is 275.

Question

A bakery makes fresh donuts every morning.If any are left at the end of the day they are donated to a homeless shelter.The number of donuts that can be sold each day is uncertain and the bakery must decide early each morning,how many donuts to make that day.The bakery has created the following payoff table to summarize the situation.  It estimates the following probabilities for the respective levels of demand.  If the bakery had perfect information about that day's demand,the expected value under certainty is 275.

Quizplus · Accepted Answer

If the bakery had perfect information about that day's demand, it would choose the optimal quantity of donuts to make, maximizing its expected profit. The expected profit would be the sum of the products of each demand level and its corresponding profit, which is not equal to 275. Therefore, the statement is false.

A Bakery Makes Fresh Donuts Every Morning