Question: A fish company purchases clams for $1.50 per pound from a group of fishermen and resells them for $2.50 per pound to restaurants. Any clams not sold to the restaurants can be sold to a local soup company for $.50 per pound. The probabilities of various levels of demand are as follows:

Demand (Pounds) Probability

500 .3

1,000 .5

2,000 .2

The company can purchase 500, 1,000 or 2,000 pounds of clams.

Determine how much the company should purchase by calculating a profit or loss for each possible purchase amount. Respond with a one-page memo to management explaining your findings.