If a model uses a discrete probability distribution for a cost per unit, which of the following is true?

• A. The cost per unit follows a normal distribution by default.
• B. The cost per unit takes on a finite set of values with specified probabilities.
• C. There is exactly one possible cost per unit.
• D. The cost per unit is continuously distributed.

Answer: (B)

Discrete probability distribution means the variable can only take on a finite or countable set of values, each with a defined probability. For a cost per unit modeled this way, the cost can be one of a specific list of values, with probabilities assigned to each value. That matches the statement that the cost per unit takes on a finite set of values with specified probabilities. A normal distribution is continuous, so it wouldn’t be used for a discrete cost. A single fixed cost would be a degenerate case, not the general discrete situation. A continuously distributed cost contradicts discreteness.