Which of these statements about the one-period model is BEST?
A)Purchasing a quantity with the highest expected payoff will result in a positive payoff regardless of the actual demand during the period.
B)The loss per unit cannot exceed the profit per unit.
C)If demand exceeds the purchased quantity then the actual payoff exceeds the expected payoff for that quantity.
D)The expected payoff for a purchase quantity is always less than the actual payoff for that quantity.

Question

Quizplus · Accepted Answer

In the one-period model, if the actual demand exceeds the purchased quantity, then the actual payoff will be higher than the expected payoff for that quantity. This is because the seller can charge a higher price for the excess demand, resulting in a higher actual payoff. Therefore, statement C is the best choice. Statements A, B, and D are incorrect. Statement A is incorrect because purchasing a quantity with the highest expected payoff does not guarantee a positive payoff, as the actual demand may still be lower than the purchased quantity. Statement B is incorrect because there is no inherent relationship between the profit per unit and the loss per unit in the one-period model. Statement D is incorrect because the expected payoff for a purchase quantity is, by definition, the average payoff based on expected demand and expected price, and is not always less than the actual payoff for that quantity.

Which of These Statements About the One-Period Model Is BEST