Half of all your potential customers would pay $10 for your product but the other half would only pay $8. You cannot tell them apart. Your marginal costs are $4. If you set the price at $10, the expected profit is:

The expected profit is the profit from customers paying $10 weighted with probability plus the weighted profit from customers paying $8. Adding the expected profit from each class of customers gives the overall expected profit combined.

Tundexi Tundexi · Answer 2 · 2020-08-13T05:34:07+02:00

Tundexi Tundexi

13-08-2020

Answer:

Expected Profit is $4

Explanation:

Price = $8

Marginal Cost = $4

The formula to derive the expected profit is Expected Profit = Price - Marginal Cost------equ(1)

Using equation (1) and given information, expected profit is calculated as

Expected Profit = Price - Marginal Cost

Expected Profit = 8 - 4

Expected Profit = $4

Thus, the Expected Profit is $4

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​Half of all your potential customers would pay $10 for your product but the other half would only pay $8. You cannot tell them apart. Your marginal costs are $4. If you set the price at $10, the expected profit is:

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Half of all your potential customers would pay $10 for your product but the other half would only pay $8. You cannot tell them apart. Your marginal costs are $4. If you set the price at $10, the expected profit is: