An apple farmer must decide how many apples to harvest for the world apple market.He knows that there is a one-third probability that the world price will be $1,a one-third probability that it will be $1.50,and a one-third probability that it will be $2.His cost function is C(Q)= 0.01Q².What is the expected price in the world apple market?

Question

Quizplus · Accepted Answer

The expected price is calculated by multiplying each possible price by its probability and then summing these products: (1/3 * $1) + (1/3 * $1.50) + (1/3 * $2) = $1.50.

An Apple Farmer Must Decide How Many Apples to Harvest