What is wrong with the manager calculation

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Reference no: EM132214308

A firm is negotiating with a local club to supply materials for a party. The firm's manager expects to sell 100 large bags of Pretzels for $3 each or 300 for $2 each; these two outcomes are judged to be equally likely. The expected number of bags sold is 200= (100 + 300)/2 and the expected price is $2.50 = ($3 + $2)/2. The manager then calculates expected revenue as the expected number sold times the expected price: E (revenue) = 200($2.50) = 500. What is wrong with the manager's calculation?

Reference no: EM132214308

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