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 maximax criterion, how many newspapers will he order?
A)75
B)150
C)100
D)125

Question

Quizplus · Accepted Answer

The maximax criterion involves selecting the option with the maximum possible payoff. Jeff makes a profit of $2.50 ($6.50 - $4.00) for each newspaper sold and incurs a loss of $3.25 ($4.00 - $0.75) for each unsold newspaper. Ordering 150 newspapers maximizes the potential profit if all are sold, aligning with the maximax criterion's focus on the highest possible gain.

Jeff Sells the New York Times Sunday Newspaper at a City