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 six and nine of them. What is the opportunity loss for purchasing seven watermelons when the demand is for nine watermelons?
A) 0
B) 3
C) 4
D) 6

Question

Quizplus · Accepted Answer

The opportunity loss is the profit lost due to not meeting demand. If the manager buys 7 watermelons but demand is for 9, he loses the profit from 2 watermelons. Each watermelon has a profit of $3 ($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