In August 2017, a Car Dealer Is Trying to Determine

question 45

Essay

In August 2017, a car dealer is trying to determine how many 2018 cars to order. Each car ordered in August 2017 costs $16,000. The demand for the dealer's 2018 models has the probability distribution shown in the table below. Each car sells for $21,000. If the demand for 2018 cars exceeds the number of cars ordered in August 2017, the dealer must reorder at a cost of $18,000 per car. Excess cars can be disposed of at $13,000 per car.
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-(A) Use simulation to determine how many cars the dealer should order in August, 2017 to maximize his expected profit.
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(B) For the optimal order quantity, find a 95% confidence interval for the expected profit.
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(C) Why is it important to develop the confidence interval in (B)?

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Definitions:

Sublimation

A psychological defense mechanism where socially unacceptable impulses are transformed into socially acceptable actions or behavior.

Mildly Hostile Humor

Forms of humor that contain subtle or indirect expressions of hostility or criticism, often used to mask aggression or discontent.

Aggressive Themes

Narrative or symbolic patterns in various forms of representations, emphasizing themes of aggression and conflict.

Tension Build-Up

The accumulation of stress or pressure over time, often leading to emotional or physical distress.