Question

A company makes electronic gadgets. One out of every 50 gadgets is faulty, but the company doesn't know which ones are faulty until a buyer complains. Suppose the company makes a $3 profit on the sale of any working gadget, but suffers a loss of $80 for every gadget because they have to repair the unit. Check weather the company can expect a profit in the long term.

Answer 1

Yes, the company can expect a profit in the long term

Explanation:

In this question, we are to project if a company is expected to make a profit or loss given the information in the question.

Let’s use the scenario of 50 gadgets produced.

1 is expected to be faulty, while 49 is thus expected to work perfectly.

Now, on this 49 sold, there is an expectancy of $3 profit. Hence, this means that for a batch of 50 gadgets produced, the amount of expected profit will be 49 * 3 = $147

The amount that would be used to repair the faulty unit is $80. If we subtract this from the total expected profit, we have $147-$80 = $67

Hence, per 50 gadgets sold, a total of $67 in profit is to be expected

This means profit is expected in the long tey