Jeff sells the New York Times Sunday newspaper at a city corner near several churches. He sells each newspaper for $6.50 after purchasing them for $4.00. Any unsold newspaper can be returned to the New York Times for a $0.75 credit. Jeff expects demand on Sunday to be 75, 100, 125, or 150 newspapers and would like to order one of these four quantities from the New York Times. If the Jeff uses the equally likely criterion, how many newspapers will he order?
A)100
B)125
C)150
D)75

Question

Quizplus · Accepted Answer

Jeff should order 100 newspapers. The expected profit for each quantity is:75 newspapers: (75 * $6.50) - (75 * $4.00) + (25 * $0.75) = $187.50100 newspapers: (100 * $6.50) - (100 * $4.00) + (0 * $0.75) = $250.00125 newspapers: (125 * $6.50) - (125 * $4.00) + (0 * $0.75) = $250.00150 newspapers: (150 * $6.50) - (150 * $4.00) + (0 * $0.75) = $225.00Therefore, Jeff should order 100 newspapers.

Jeff Sells the New York Times Sunday Newspaper at a City