2. Every evening, Empire News needs to determine how many copies of the newspaper to pur- chase for the following morning. A newspaper costs $0.50 to purchase and sells for $2.25. Any unsold newspapers can be recycled at the end of the day at a value of $0.25 per newspaper. The following table provides Empire News’ daily demand distribution for newspapers. 1 Number of newspapers| 160 | 170| 175| 185 | 200 Probability 210| 220 0.2 | 0.1 | 0.05 | 0.2 | 0.15 | 0.05 | 0.20 | 0.05 205 a. Suppose that Empire News is considering the purchase of 200 newspapers. What is the marginal value from a 201st newspaper? Is it profitable for Empire News to purchase its 201st newspaper? Justify your answer. b. What is the optimal number of newspapers for Empire News to purchase each evening?
2. Every evening, Empire News needs to determine how many copies of the newspaper to pur- chase for the following morning. A newspaper costs $0.50 to purchase and sells for $2.25. Any unsold newspapers can be recycled at the end of the day at a value of $0.25 per newspaper. The following table provides Empire News’ daily demand distribution for newspapers. 1 Number of newspapers| 160 | 170| 175| 185 | 200 Probability 210| 220 0.2 | 0.1 | 0.05 | 0.2 | 0.15 | 0.05 | 0.20 | 0.05 205 a. Suppose that Empire News is considering the purchase of 200 newspapers. What is the marginal value from a 201st newspaper? Is it profitable for Empire News to purchase its 201st newspaper? Justify your answer. b. What is the optimal number of newspapers for Empire News to purchase each evening?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Transcribed Image Text:2. Every evening, Empire News needs to determine how many copies of the newspaper to pur-
chase for the following morning. A newspaper costs $0.50 to purchase and sells for $2.25. Any
unsold newspapers can be recycled at the end of the day at a value of $0.25 per newspaper. The
following table provides Empire News' daily demand distribution for newspapers.
Number of newspapers 160 || 170 | 175 | 185 | 200
Probability
205 210 | 220
0.2 0.1 | 0.05 | 0.2 | 0.15 || 0.05 | 0.20 | 0.05
a. Suppose that Empire News is considering the purchase of 200 newspapers. What is the marginal
value from a 201st newspaper? Is it profitable for Empire News to purchase its 201st newspaper?
Justify your answer.
b. What is the optimal number of newspapers for Empire News to purchase each evening?
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Can I have more details on where does numbers in a) come from:
0.30 × $1.75 - 0.70×$0.5
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