Which of the following conditions is the optimal solution to the newsvendor problem, where Q is the quantity to be purchased, and D is demand?
A) Q D
B) Q = D
C) D Q
D) Q / D = 0

Question

Which of the following conditions is the optimal solution to the newsvendor problem, where Q is the quantity to be purchased, and D is demand?
A) Q > D
B) Q = D
C) D > Q
D) Q / D = 0

Quizplus · Accepted Answer

The optimal solution to the newsvendor problem occurs when Q matches D, meaning that the quantity purchased perfectly aligns with the demand. Any excess would lead to overstocking and waste, while any shortage would lead to lost sales and potential customer dissatisfaction. Therefore, the best choice is B, where Q = D.

Which of the Following Conditions Is the Optimal Solution to the Newsvendor