Lisa runs a local flower shop.If it rains on Valentine's Day and she opens the shop,she will lose $200.If it does not rain on Valentine's Day,she will earn $500 dollars as profits.What is Lisa's expected profit on Valentine's Day if she only knows that there is a 30% chance of rain that day?
A)$350
B)$290
C)$200
D)$150

Question

Quizplus · Accepted Answer

To calculate the expected profit, we need to multiply the probability of each outcome by the profit/loss associated with that outcome, and then add them up.

E(expected profit) = P(raining) * profit (if it rains) + P(not raining) * profit (if it doesn't rain)

Let P(raining)= 0.3 and P(not raining) = 0.7

E = 0.3*(-$200)+0.7*$500
E = -$60+$350
E = $290

Therefore, Lisa's expected profit on Valentine's Day is $290.

Lisa Runs a Local Flower Shop