2. Nancy wants to sell some special material called \"CC\" at the price of $30 p

Question

2. Nancy wants to sell some special material called "CC" at the price of $30 per pound at this Sunday Festival. The order price from the manufacturer is $20 per pound. She can return the unsold material to the manufacturer at $10 per pound. Suppose the probability distribution for demand is given in the flowing table. 2 Demand (pounds) 10 20 30 Probability 0.2 0.4 0.4 (a) (10)How many pounds of CC should Nancy order? You can use any method. (b) (10) If Nancy decides to order 20 pounds, what is her expected profit?

Explanation / Answer

a) The required number of pounds = xp(x) = 10 * 0.2 + 20 * 0.4 + 30 * 0.4 = 22

b) Expected profit = 20 * 0.4 = $8

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