Exhibit 2-1 a T-Shirt Company Is Planning a Production Run for an for an Event

question 13

Essay

Exhibit 2-1
A t-shirt company is planning a production run for an event where the attendance (and thus demand for t-shirts) is uncertain. The event planners have indicated that they think the attendance will be 500, 750 or 1000, with probabilities of 30%, 50% and 20% respectively. The company must pre-order the blank t-shirts (cost=$5 per shirt) and it can sell finished shirts for $12 apiece. Any finished shirts that cannot be sold at the event can be sold for $2 apiece to a used clothing vendor.
-Refer to Exhibit 2-1.What are the two possible cases for the amount of t-shirts that will be sold to the used clothing vendor
How would you calculate this amount in a spreadsheet model

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Definitions:

Tax

Mandatory charges imposed by governments on individuals or entities to fund public services and goods.

Deadweight Loss

An economic inefficiency resulting from a market not reaching equilibrium, where potential gains from trade are not fully realized.

Demand

It represents the quantity of a good or service that consumers are willing and able to purchase at various prices.

Supply

The total amount of a product or service that is available to consumers.