3.3) A small market orders copies of a certain magazine for its magazine rack each week....

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3.3) A small market orders copies of a certain magazine for itsmagazine rack each week. Let X = demand for the magazine,with the following pmf.
x 1 2 3 4 5 6
p(x)
1
13

1
13
3
13

4
13

2
13

2
13
Suppose the store owner actually pays $2.00 for each copy of themagazine and the price to customers is $4.00. If magazines left atthe end of the week have no salvage value, is it better to orderthree or four copies of the magazine? [Hint: For boththree and four copies ordered, express net revenue as a function ofdemand 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?
-3 magazines
-4 magazines

Answer & Explanation Solved by verified expert

4.1 Ratings (698 Votes)

Let X be the quantity of demand Let Q be the quantity that thestore owner ordersThe quantity that he can sell S is minimum of X and Q He cannot sell more than what he orders or more than the demandThe cost to See Answer

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