A Concert Promoter Assesses That the Probability of a Concert

question 2

Multiple Choice

A concert promoter assesses that the probability of a concert being a success is 0.4. The initial cash cost will be £50,000. A success will create a present value of all cash flows of £250,000 and a flop will lose £100,000. What is the expected NPV, using a conventional approach?

• A) £10,000
• B) £74,000
• C) - £10,000
• D) £0

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Definitions:

Full Employment

Refers to the condition in an economy where all available labor resources are being used in the most efficient way possible, essentially meaning that there is no cyclical or involuntary unemployment.

Production Curve

The production curve, often referred to as the production possibility frontier, is a graph that shows the maximum number of goods or services that can be produced with a fixed amount of resources.

Iraq War

A conflict that began in 2003 with the invasion of Iraq by a coalition led by the United States, aimed at toppling the government of Saddam Hussein.

Production Possibilities Curve

A graphical representation showing the maximum combination of goods and services that can be produced with available resources and technology.