Question
A newspaper seller is trying to order newspapers for tomorrow, but she doesn't know exactly how many people will want to buy newspapers from her.
A newspaper seller is trying to order newspapers for tomorrow, but she doesn't know exactly how many people will want to buy newspapers from her. However, she knows the probability distribution of demand. Specifically she knows that there will be a 20% chance of demand = 100, 20% chance of demand = 200, 20% chance of demand = 300, 20% chance of demand = 400, and 20% chance of demand = 500. She can sell newspapers at $5 each, and buys the newspapers from the wholesaler for $1. Anything she doesn't sell she has to throw away (and thus gets $0) at the end of the day. How many newspapers should she buy for tomorrow?
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