Consider the data given in problem 1 for the Campus Bookstore at East Tennessee State University. Based on conversations held with the chair of the economics department, suppose the bookstore manager believes that the following probabilities hold:
a. Using the expected value criterion, determine how many economics books the bookstore manager should purchase in order to maximize the store’s expected profit. Do you think the expected value criterion is appropriate for this problem?
b. Based on the probabilities given in part a, determine the expected value of perfect information. Interpret its meaning.
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