The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Since this seedless watermelon costs $4, will sell for $7, and is highly perishable, he only expects to sell between 6 and 9 of them. What is the opportunity loss for purchasing 6 watermelons when the demand is for 8 watermelons?
A) 0
B) 3
C) 4
D) 6

Question

Quizplus · Accepted Answer

The opportunity loss is the profit lost from not meeting demand. If 6 watermelons are purchased and demand is for 8, 2 sales are lost. Each sale lost is $3 profit ($7 selling price - $4 cost), so the opportunity loss is 2 x $3 = $6.

The Manager of Paul's Fruit and Vegetable Store Is Considering