A lab orders 100 rats a week for each of the 52 weeks in the year for experiments that the lab conducts.Prices for 100 rats follow the following distribution: Price: $10.00 $12.50 $15.00
Probability: 0.35 0.40 0.25
How much should the lab budget for next year's rat orders be,assuming this distribution does not change?
A) $780
B) $650
C) $520
D) $637

Question

Quizplus · Accepted Answer

To calculate the expected value of the rat price, we use the formula:

Expected value = (price1 x probability1) + (price2 x probability2) + (price3 x probability3)

= (10 x 0.35) + (12.50 x 0.40) + (15 x 0.25)

= 3.5 + 5 + 3.75

= $12.25

Therefore, the lab should budget for:

100 rats/week x 52 weeks/year x $12.25/100 rats = $637.

A Lab Orders 100 Rats a Week for Each of the 52