A vendor sells fresh flowers bundled into small units. He waits for his supplier to deliver both units of flowers each morning. He can only sell fresh flowers (not yesterday's leftovers) and has developed the following probability distribution of daily demand for this item:

Demand Probability

0 5%

1 20%

2 40%

3 25%

4 10%

Unit cost to acquire = $60, unit selling price = $1.20. Salvage value (from a charitable organization) = $0.20 per unit. Using net profit as a payoff, and the expected value criterion, how many units should the vendor order each day to maximize profit over the long-term?

a. 1

b. 2

c. 3

d. 4

Refer to the previous question. The most the vendor should be willing to pay for any information concerning demand is:

a. $1.29

b. 0.90

c. 1.39

d. 0.39