In a single-period inventory situation, the probabilities that demand will be 1, 2, 3, or 4 units are .3, .3, .2, and .2, respectively. If two units are stocked, what is the probability of selling both of them?
A) .5
B) .6
C) .7
D) .8
E) .9

Question

Quizplus · Accepted Answer

The probability of selling both units can be calculated as the probability of demand being either 1 or 2 (as we have only 2 units in stock) i.e.

P(demand = 1 or 2) = P(demand = 1) + P(demand = 2) = 0.3 + 0.3 = 0.6

Therefore, the probability of selling both units is 0.6 or 60%. The correct answer is C.

In a Single-Period Inventory Situation, the Probabilities That Demand Will