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 six and nine of them. What is the opportunity loss for purchasing six watermelons when the demand is for eight watermelons?
A) 0
B) 3
C) 4
D) 6

Question

Quizplus · Accepted Answer

The opportunity loss is the profit lost from not meeting the demand. If the manager buys six watermelons but the demand is for eight, he misses out on selling two watermelons. Each watermelon has a profit of $3 ($7 selling price - $4 cost), so the opportunity loss is 2 watermelons x $3 = $6.

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