Which of these statements about the one-period model is best?
A) Purchasing a quantity with the highest expected payoff will result in a positive payoff regardless of the actual demand during the period.
B) The loss per unit cannot exceed the profit per unit.
C) If demand exceeds the purchased quantity then the actual payoff exceeds the expected payoff for that quantity.
D) The expected payoff for a purchase quantity is always less than the actual payoff for that quantity.

Question

Quizplus · Accepted Answer

This statement is true in the one-period model. If demand exceeds the purchased quantity, the actual payoff will be higher than the expected payoff for that quantity because the price may increase due to scarcity. A and D are not necessarily true, as the highest expected payoff does not guarantee a positive payoff, and the expected payoff could be equal to or greater than the actual payoff. B is also not true, as the loss per unit can exceed the profit per unit in certain cases (e.g. if the price falls below the purchase price).

Which of These Statements About the One-Period Model Is Best