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.The expected profit-maximizing quantity is:

Question

Quizplus · Accepted Answer

To find the expected profit-maximizing quantity, we need to first calculate the expected price (P) and expected quantity (Q) based on the given probabilities:
P = (1/3)*$1 + (1/3)*$1.50 + (1/3)*$2 = $1.50
Q = Q* = (P - MC)/(2*a) = (1.50 - 0)/(2*0.01) = 75

Therefore, the best choice is to harvest 75 apples for the world apple market.

An Apple Farmer Must Decide How Many Apples to Harvest