The demand for movie rentals for a newly released movie is random. Suppose a mov

Question

The demand for movie rentals for a newly released movie is random. Suppose a movie rental store charges $2.50 for a new release rental and it costs the movie store $1.25 per copy of the movie. The following describes the distribution of demand for a new release. There is a probability of 0.17 that the store will rent 11 movies; there is a probability of 0.18 that the store will rent 14 movies; there is a probability of 0.21 that the store will rent 18 movies; otherwise, the store will rent 21 movies. What is the expected profit if they order 18 copies of a newly released movie? (please express your answer using 2 decimal places)

Explanation / Answer

the profit of a company per movie = sell price - cost price = 2.5 - 1.25 = 1.25 per movie is the profit

diftribution of movies

x p(x)

11 0.17

14 0.18

18 0.21

21 0.44

expected profit for x = 18 will be = x*p(x)*profit per movie = 18*0.21*1.25 = 4.72

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