Large Lots is planning a seven-day promotion on a discontinued model of 31 color television sets. At
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Large Lots is planning a seven-day promotion on a discontinued model of 31" color television sets. At a price of $575 per set, the daily demand for this type of TV has been estimated as follows:
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Large Lots can order up to 50 of these TVs from a surplus dealer at a cost of $325. This dealer has offered to buy back any unsold sets at the end of the promotion for $250 each.
a. How many TVs should Large Lots order if it wants to maximize the expected profit on this promotion?
b. What is the expected level of profit?
c. Suppose the surplus dealer will buy back a maximum of only four sets at the end of the promotion. Would this change your answer? If so,how?
A dealer in the securities market is an individual or firm who stands ready and willing to buy a security for its own account (at its bid price) or sell from its own account (at its ask price). A dealer seeks to profit from the spread between the...
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