Half of all potential customers would pay $10 for your product but half would only pay $8 but you cannot tell them apart.Your marginal costs are $4.If you set the price at $10,the expected profit is:
A)$3
B)$4
C)$5
D)$6

Question

Quizplus · Accepted Answer

Half of the customers would pay $10 and the other half would pay $8. The expected profit from each customer is ($10 - $4) / 2 + ($8 - $4) / 2 = $3. Therefore, the expected profit from all customers is $3 * 1/2 = $1.5.

Half of All Potential Customers Would Pay $10 for Your