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# 5. (5 marks) A tour bus can hold 25 tourists. Tickets costs \$50 and are non-refundable. From previous experience, the tour operator supposes there is a 10% chance of a no-show, independent of other ti...

## Question

###### 5. (5 marks) A tour bus can hold 25 tourists. Tickets costs \$50 and are non-refundable. From previous experience, the tour operator supposes there is a 10% chance of a no-show, independent of other ti...

5. (5 marks) A tour bus can hold 25 tourists. Tickets costs \$50 and are non-refundable. From previous experience, the tour operator supposes there is a 10% chance of a no-show, independent of other ticket purchasers. The tour operator justifies that if there is a 10% (1 in 10) chance of a no show, he should expect that out of 25 tickets sold, on average 2.5 will not show up. In which case, the tour operator decides to sell 27 tickets. If a tourist shows up and the bus is full, the tour operator will refund their \$50 for the ticket and give them an additional value as compensation. If the tour operator sells 27 tickets for a tour, what is the maximum they can offer in compensation so that on average he will expect to make more than \$1250 (the amount he would make if he sold 25 tickets)?

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