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# Marginal analysis - Profit Maximization

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Ayang imchem is the manager of casto cheese, which produces cheese spreads and other cheese related products. E-Z spread cheese is a product that has always been popular. The probability of sales, cases, is as follows:
Demand (cases) Probability
10 0.2
11 0.3
12 0.2
13 0.2
14 0.1

A case of E-Z spread cheese sells for \$ 100 and has a cost of \$ 75. Any cheese that is not sold by the end of the week is sold to a local food processor for \$ 50. Teresa never sells cheese that is more than a week old. Use marginal analysis to determine how many cases of E-Z spread cheese to produce each week to maximize average profit.

https://brainmass.com/statistics/time-series-analysis/marginal-analysis-profit-maximization-580007

#### Solution Preview

Marginal profit/case (MP) = 100 - 75 = \$25
Marginal loss/case (ML) = 75 - 50 = \$25

Probability (no profit no ...

#### Solution Summary

Marginal analysis to find suitable option for profit maximization.

\$2.19