Managers of the restaurant, NicePizzeria@Nola, have to plan for the number of pizzas they want to make at the beginning of each day. Based on market research, the managers know the daily demand can only be one of the three levels: 30, 40 or 50 pizzas. Also, the probabilities of getting a daily demand of 30, 40, 50 pizzas are 0.3, 0.4, 0.3 respectively. The managers decide that their tentative daily supply of pizza should also be one of the three levels: 30, 40 or 50 pizzas. Each pizza costs $3 to make and the price is $8 per pizza. Note: The profit for each pizza sold is $5. For the ones supplied but not sold, the profit is -$3. Fill in the following profit table (hint: use two-way table ) and use the profit table to answer the questions. Three demand levels 30 40 50 30 Three supply levels 40 50 1) What is the maximin supply level? 2) What is the maximum expected profit (across three supply levels)?

Managers of the restaurant, NicePizzeria@Nola, have to plan for the number of pizzas they want to make at the beginning of each day. Based on market research, the managers know the daily demand can only be one of the three levels: 30, 40 or 50 pizzas. Also, the probabilities of getting a daily demand of 30, 40, 50 pizzas are 0.3, 0.4, 0.3 respectively. The managers decide that their tentative daily supply of pizza should also be one of the three levels: 30, 40 or 50 pizzas. Each pizza costs $3 to make and the price is $8 per pizza. Note: The profit for each pizza sold is $5. For the ones supplied but not sold, the profit is -$3. Fill in the following profit table (hint: use two-way table ) and use the profit table to answer the questions. Three demand levels 30 40 50 30 Three supply levels 40 50 1) What is the maximin supply level? 2) What is the maximum expected profit (across three supply levels)?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter17: Making Decisions With Uncertainty

Section: Chapter Questions

Problem 17.5IP

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