2A.

how do i do 4a and 4b?

Suppose you were trying to solve for the theoretically optimal solution of the Inventory Management problem. You don't know what to stock because you cannot perfectly forecast the demand D (specifically, the daily demand D has a Normal distribution with a mean of / = 120 and standard deviation o = 25), but you want to figure out some stocking level (let's denote it as S* ) to maximize expected profit. Thinking about it economically, if the cost of stocking one more muffin outweighed the expected benefit of having more stocked, then you would not want to stock more. On the other hand, if the expected benefit of stocking another muffin outweighed the cost of a muffin, then you would want to stock more. Therefore, at your optimal decision S", the expected marginal revenue of stocking an additional muffin (the benefit) should equal the expected marginal cost. 4a. (2.5 points) What is the expected marginal cost of stocking one more muffin? Hint: This is just a number (cost is not a random variable, so the expected marginal cost is just the cost of stocking one more muffin). 4b. (2.5 points) What is the expected marginal revenue of stocking one more muffin? To help you, fill in the blank below: E Marginal Revenue] = ( ) x 2.50