Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.
-Given 0.2,0.4,and 0.4 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the optimal expected monetary value (EMV)for buying roses is _______.

Question

Blossom's Flowers purchases roses for sale for Valentine's Day.The roses are purchased for $10 a dozen and are sold for $20 a dozen.Any roses not sold on Valentine's Day can be sold for $5 per dozen.The owner will purchase 1 of 3 amounts of roses for Valentine's Day: 100,200,or 400 dozen roses.
-Given 0.2,0.4,and 0.4 are the probabilities for the sale of 100,200,or 400 dozen roses,respectively,then the optimal expected monetary value (EMV)for buying roses is  _______.

Quizplus · Accepted Answer

The expected payout for each choice is as follows:

For buying 100 dozen roses: 
(0.2)(20*100) + (0.8)(5*100) = $400 + $400 = $800

For buying 200 dozen roses: 
(0.4)(20*200) + (0.6)(5*200) = $1,600 + $600 = $2,200

For buying 400 dozen roses: 
(0.4)(20*400) + (0.6)(5*400) = $3,200 + $1,200 = $4,400

So, the optimal expected monetary value is the highest expected payout, which is from buying 400 dozen roses for $1,600. Therefore, the answer is D.

Blossom's Flowers Purchases Roses for Sale for Valentine's Day