Question
A small market orders copies of a certain magazine for its magazine rack each week. Let X = demand for the magazine, with the
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 1 2 3 4 5 6 1 1 p(x) 16 16 16 155 4 3 2 16 16 16 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.) $ What is the expected profit if four magazines are ordered? (Round your answer to two decimal places.) $ How many magazines should the store owner order? O3 magazines
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