Happy Bagels sells its bagels for $6 each and the firm has a constant marginal cost of $4 per bagel, which is equal to its (constant) average total cost. If Happy Bagels does not sell a bagel the day it is produced, the bagel is sold as day- old for $2. If Happy Bagels is currently holding 50 bagels in inventory and the probability that Happy Bagels will sell 50 bagels or more is 0.60, which of the following statements is true?
A) To obtain the profit- maximizing, optimal level of inventory, Happy Bagels needs to increase its inventory.
B) Happy Bagels is holding the profit- maximizing, optimal level of inventory.
C) To obtain the profit- maximizing, optimal level of inventory, Happy Bagels needs to decrease its inventory.
D) To obtain the profit- maximizing, optimal level of inventory, Happy Bagels needs to decrease its inventory by exactly one- half.
Correct Answer:
Verified
