A small market orders copies of a certain magazine for its magazine rack each week. Let X = demand for the magazine, with the following pmf. 1 2 3 4 5 4 3 1 15 1 4 15 15 15 15 X p(x) 6 2 15 Suppose the store owner actually pays $2.00 for each copy of the magazine and the price to customers is $4.00. If magazines left at the end of the week have no salvage value, is it better to order three or four copies of the magazine? [Hint: For both three and four copies ordered, express net revenue as a function of demand X, and then compute the expected revenue.] What is the expected profit if three magazines are ordered? (Round your answer to two decimal places.) $2 X What is the expected profit if four magazines are ordered? (Round your answer to two decimal places.) $ 5.6 How many magazines should the store owner order? O 3 magazines O 4 magazines

A First Course in Probability (10th Edition)
10th Edition
ISBN:9780134753119
Author:Sheldon Ross
Publisher:Sheldon Ross
Chapter1: Combinatorial Analysis
Section: Chapter Questions
Problem 1.1P: a. How many different 7-place license plates are possible if the first 2 places are for letters and...
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A small market orders copies of a certain magazine for its magazine rack each week. Let X = demand for the magazine, with the following pmf.
X
p(x)
1
1
15
2 3
1 4
15 15
4
5
6
4
3
2
15 15 15
Suppose the store owner actually pays $2.00 for each copy of the magazine and the price to customers is $4.00. If magazines left at the end of the week have no salvage value, is it better to
order three or four copies of the magazine? [Hint: For both three and four copies ordered, express net revenue as a function of demand X, and then compute the expected revenue.]
What is the expected profit if three magazines are ordered? (Round your answer to two decimal places.)
$2
X
What is the expected profit if four magazines are ordered? (Round your answer to two decimal places.)
$ 5.6
How many magazines should the store owner order?
3 magazines
4 magazines
Transcribed Image Text:A small market orders copies of a certain magazine for its magazine rack each week. Let X = demand for the magazine, with the following pmf. X p(x) 1 1 15 2 3 1 4 15 15 4 5 6 4 3 2 15 15 15 Suppose the store owner actually pays $2.00 for each copy of the magazine and the price to customers is $4.00. If magazines left at the end of the week have no salvage value, is it better to order three or four copies of the magazine? [Hint: For both three and four copies ordered, express net revenue as a function of demand X, and then compute the expected revenue.] What is the expected profit if three magazines are ordered? (Round your answer to two decimal places.) $2 X What is the expected profit if four magazines are ordered? (Round your answer to two decimal places.) $ 5.6 How many magazines should the store owner order? 3 magazines 4 magazines
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