Problem:
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 fot $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 expected price is $2,5 = ($3+$2)/2. The manger then calculates expected revenue as the expected number sold times the expected price: E(Revenue) = 200($2,5)=$500. What is wrong with the manager calculation?