

Probability Question - questionhypo

Hi everyone:<p>Learning probability – encountered hard question, seeking help.<p>A man bought a basket of carrots at $150 per basket. He sells each basket for $270 but the probability of that a basket of carrots will be unfit for sale is 1/12 and he will lose $150. Find the average profit per basket.<p>This is my solution:
P(unfit) = 1/12
P(fit)   = 11/12<p>Profit when unfit = $270 - $150 - $150 = -$30
Profit when fit   = $270 - $150        = $120<p>Average Profit = (1/12 * -30) + (11/12 * 120) = $107.5<p>... but the answer is $97.5<p>Does anyone know why?<p>Thanks!
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ghoul2
profit when unfit is not $270 - $150 - $150, its simply -$150.

When the basket is unfit for sale, it goes unsold. Which means the man is out
$150 (as it says in the question). The $270, sale price, does not even enter
the picture as the basked it unsold.

thus average profit = 1/12 * -150 + 11/12 * 120 = 97.5

