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what is payoff table n how to calculate it ?
Q: In a restaurant there is a 30% chance of five apple pies being ordered a day and a 70% chance of ten being ordered. Each apple pie sells for $2. It costs $1 to make an apple pie.using a payoff table, decide how many apple pies the restaurant should prepare each day ,bearing in mind that unsold apple pie must b thrown away at the end of each day ..
A:Ten pie should b prepared.two types of orders are 5 apple pies and 10 apple pie.
you can decide to make either 10 apple pie or 5 apple pie.
your decision alternatives are 5 apple pie with 30 % or 10 apple pie with 70 percent.if you choose 5 apple pie , how much profit on 5 apple pie , it is 5 and how much profit on 10 apple pie,it is zero. since we are not making 10 apple pie.
if you choose 10 apple pie, you can sell 5 apple pie if you wish to. and also sell 10 apple pie at a profit of 10.
then refer to payoff table given in textbook again.
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