TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature
-Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.Given 0.2,0.4,and 0.6 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the optimal alternative using EMV for selling roses is to buy ________ dozen roses.
A)100
B)200
C)400
D)600

Question

TABLE 19-1
The following payoff table shows profits associated with a set of 3 alternatives under 2 possible states of nature  
-Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.Given 0.2,0.4,and 0.6 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the optimal alternative using EMV for selling roses is to buy ________ dozen roses.
A)100 
B)200 
C)400 
D)600

Quizplus · Accepted Answer

The expected monetary value (EMV) is calculated for each purchase option. Buying 400 dozen roses maximizes the EMV given the probabilities of selling different quantities.

TABLE 19-1 The Following Payoff Table Shows Profits Associated with a Set