Happy Bagels Sells Its Bagels for $6 Each and the Firm

question 56

Multiple Choice

Happy Bagels sells its bagels for $6 each and the firm has a constant marginal cost of $4 per bagel, which is equal to its (constant) average total cost. If Happy Bagels does not sell a bagel the day it is produced, the bagel is sold as day- old for $2. If Happy Bagels is currently holding 50 bagels in inventory and the probability that Happy Bagels will sell 50 bagels or more is 0.60, which of the following statements is true?

• A)To obtain the profit- maximizing, optimal level of inventory, Happy Bagels needs to increase its inventory.
• B)Happy Bagels is holding the profit- maximizing, optimal level of inventory.
• C)To obtain the profit- maximizing, optimal level of inventory, Happy Bagels needs to decrease its inventory.
• D)To obtain the profit- maximizing, optimal level of inventory, Happy Bagels needs to decrease its inventory by exactly one- half.

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