Question

Ten motors are packaged for sale in a certain warehouse. The motors sell for $100 each, but a double-your-money-back guarantee is in effect for any defectives the purchaser may receive. Find the expected net gain for the seller if the probability of any one motor being defective is 0.03. (Assume that the quality of any one motor is independent of that of the others.)

Answer 1

expected gain = $940

Explanation:

given data

sale in a certain warehouse = 10 moters

motors sell = $100

probability of defective = 0.03

solution

we get here expected total cost of 1 moter is the sum of product of gain and probabi;ity

EV = $100 × 0.97 + ( -$100 × 0.03)

EV = 94

so expected gain for seller on 10 moter is

expected gain = 10 × $94

expected gain = $940