A Retailer Is Deciding How Many Units of a Certain

question 7

Multiple Choice

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 $11 per unit and sells for $25 per unit. What is the conditional value for the decision alternative "Stock 3" and state of nature "Sell 1"?

• A) 1.4 units
• B) $1 profit
• C) $25 profit
• D) $-8 profit
• E) $23.80 profit

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Definitions:

Business Person

An individual who operates a business or enterprise, taking on greater than normal financial risks in order to do so.

Internet Transactions

The buying and selling of goods and services or the transmitting of funds or data, over an electronic network, primarily the internet.

Offer

An offer from one entity to another aimed at establishing a legal contract if accepted.

Contract

An agreement creating obligations enforceable by law, formed by the mutual consent of parties with capacity to agree.