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This would be the profit if it were assumed that all 4,000 pretzels were sold. However, only 3,000 pretzels were sold.
This answer is calculated without regard to the unsold pretzels that are discarded because they will be stale before the next home game. Those pretzels are a cost that needs to be included in the calculation of any profit.
The meaning of the word "conditional" in "conditional profit" is similar to the meaning of the word "conditional" in "conditional probability." The conditional probability of two events is the probability that the second event will occur when it is known that the first event has already occurred. Conditional profit is conditional because a certain amount of profit (or loss) is associated with each event, such as purchasing a certain amount of inventory and selling a certain amount of inventory. In this problem, the first event is the purchase of 4,000 pretzels. So given that we know that 4,000 pretzels have been purchased, what is the profit from that course of action if demand is only 3,000 pretzels? In other words, in this problem, there are actually two conditions that are known: (1) 4,000 pretzels are supplied, and (2) demand is 3,000 pretzels. Since the amount supplied is given and the amount demanded is given, the frequency distribution of the possible demand levels (sales volumes) for pretzels is irrelevant. Since unsold pretzels are discarded, to calculate the profit we need to use the cost of all 4,000 pretzels that will be purchased to sell, not only the cost of the 3,000 pretzels that are sold. The cost is $1,200 (4,000 × $.30). The revenue from selling 3,000 pretzels is $3,000 (3,000 × $1). The difference between the revenue of $3,000 and the cost of $1,200 is the profit, which is $1,800.
The correct answer is given. See the correct answer for a complete explanation.