The manager of Paul's fruit and vegetable store is considering the purchase of a new seedless watermelon from a wholesale distributor. Because this seedless watermelon costs $4,will sell for $7,and is highly perishable,he expects only to sell between six and nine of them. What is the payoff value for the purchase of nine watermelons when the demand is for eight watermelons?
A)6
B)13
C)20
D)27

Question

Quizplus · Accepted Answer

The payoff value for purchasing nine watermelons when the demand is for eight involves selling all eight demanded watermelons at a profit of $3 each ($7 selling price - $4 cost). So, 8 watermelons * $3 profit each = $24. However, one watermelon remains unsold and perishes, resulting in a loss of its $4 cost. Therefore, the total payoff is $24 (from sales) - $4 (loss from the unsold watermelon) = $20.

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