The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Since this seedless watermelon costs $4, will sell for $7, and is highly perishable, he only expects to sell between six and nine of them. What is the payoff value for the purchase of eight watermelons when the demand is for seven watermelons?
A) 10
B) 17
C) 24
D) 21

Question

Quizplus · Accepted Answer

If the store purchases 8 seedless watermelons, it will cost them 8 x $4 = $32.

If the demand is for 7 watermelons, they will sell all 7 watermelons at a price of $7 each, earning a revenue of 7 x $7 = $49.

The profit will be $49 - $32 = $17.

Therefore, the payoff value for purchasing 8 watermelons when the demand is for 7 is $17.

Out of the given options, the best choice to make is to purchase 8 watermelons since the payoff value is the highest.

The Manager of Paul's Fruit and Vegetable Store Is Considering