Answer the Following Questions Using the Information Below

question 145

Multiple Choice

Answer the following questions using the information below:
Patrick Ross has three booth rental options at the county fair where he plans to sell his new product. The booth rental options are:
Option 1: $1,000 fixed fee, or
Option 2: $750 fixed fee + 5% of all revenues generated at the fair, or
Option 3: 20% of all revenues generated at the fair.
The product sells for $37.50 per unit. He is able to purchase the units for $12.50 each.
-Which option should Patrick choose to maximize income assuming there is a 40% probability that 70 units will be sold and a 60% probability that 40 units will be sold?

• A) Option 1
• B) Option 2
• C) Option 3
• D) All options maximize income equally.

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Definitions:

Innovative Product

A new or significantly improved product, service, or technology that meets a new requirement or serves a new market, often resulting in enhanced efficiency, convenience, or performance.

Initial Price

The starting price set for a product or service when it is first introduced to the market.

Publishers' Retail List Price

The price suggested by publishers that retailers should charge for their books.

Distributors

Intermediaries that buy products from manufacturers or wholesalers and sell them to retailers or directly to consumers.