The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Since this seedless watermelon costs $4, will sell for $7, and is highly perishable, he only expects to sell between 6 and 9 of them. What is the payoff value for the purchase of 8 watermelons when the demand is for 6 watermelons?
A) 17
B) 21
C) 24
D) 10

Question

Quizplus · Accepted Answer

The payoff value is calculated by considering the revenue from selling 6 watermelons and the cost of purchasing 8 watermelons. Revenue from selling 6 watermelons at $7 each is $42. The cost of purchasing 8 watermelons at $4 each is $32. The payoff is $42 - $32 = $10.

The Manager of Paul's Fruit and Vegetable Store Is Considering