A. This is the expected payoff for selling coffee when the weather is cold multiplied by the probability of cold weather of .60, plus the expected payoff for selling soft drinks when the weather is hot multiplied by the probability of hot weather of .40. That is not the expected payoff for selling coffee.

B. This is not possible, as the maximum the beverage stand can obtain is $2,500 if it sells soft drinks when the weather is hot.

C. To solve this problem we have to identify the expected payoff of selling coffee when the weather is either hot or cold. That will be the weighted average of the expected payoffs for serving coffee, weighted according to the probability of cold weather and hot weather. So we will multiply each possible payoff for selling coffee by its corresponding probability.

If the stand sells coffee and the weather is hot, it will make $1,900, and the probability of hot weather is 40% (100% - 60%). If the stand sells coffee and the weather is cold, it will make $2,000, and the probability of cold weather is 60%. Thus, the weighted average payoff of selling coffee is ($1,900 × .40) + ($2,000 × .60), which is $1,960. And that is the expected payoff for selling coffee.

D. This is the expected payoff for selling soft drinks when the weather is cold multiplied by the probability of cold weather of .60, plus the expected payoff for selling coffee when the weather is hot multiplied by the probability of hot weather of .40. That is not the expected payoff for selling coffee.