If a vendor has correctly used marginal analysis to select their stock levels for the day (as in the newsperson problem),and the profit resulting from the last unit being sold (C_u)is $120 and the loss resulting from that unit if it is not sold (C_o)is $360,which of the following is the probability of the last unit being sold? A) Greater than 0.90 B) Greater than 0.85 C) Greater than 0.75 D) Greater than 0.25 E) None of the above

Question

Quizplus · Accepted Answer

From equation 11.1,P < = C_u/(C_u + C_o)= 120/480 = 0.25.Since P is the probability that the unit will not be sold and 1 - P is the probability of it being sold,the answer to this question is 1 - 0.25 or 0.75.

If a Vendor Has Correctly Used Marginal Analysis to Select