Risk and Uncertainty – Course Notes, Chapter 9, Eg 1

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    Could anyone assist me with how Open Tuition came up with the values in Part A of the question for all possible profits that could result?
    Thank You


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    John Moffat
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    The profits have been calculated on the basis that the contract quantity has to be supplied, and they make $3 per unit profit ($9-$6). The rest will be sold to normal customers, and they make a profit of $5 per unit ($11-$6). However remember that the maximum we can produce is 1200 units, and that the contract quantity must be supplied. Only any remaining can be sold to normal customers (even if they demand more).

    Have you watched the lecture on this website that goes through this example?

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