The Hollywood Stock Exchange Allows Users to Bet on the Success

question 189

Multiple Choice

The Hollywood Stock Exchange allows users to bet on the success of movies already produced. Imagine that a new exchange develops that allows users to bet on the success of movies not yet produced. A contract would pay some fraction of the film's future gross earnings if the film actually gets produced, and users would have their money returned to them if the film were not made. Which statement is NOT true?

• A) Studios could use such information to make films that are more popular and profitable.
• B) Studios could make better decisions about budgeting and marketing.
• C) Studios would know in advance whether the prediction market was accurate.
• D) Studios have an incentive to set up such a market.

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Definitions:

Equilibrium Price

The market price at which the quantity of goods supplied equals the quantity demanded, leading to market stability.

Quantity Supplied

The supply of goods or services that vendors are prepared and capable of offering at an established price over a specified duration.

Quantity Demanded

The total amount of a good or service that consumers are willing and able to purchase at a given price in a specific time period.

Clear The Market

This is a term used in economics to describe a scenario where the quantity supplied matches the quantity demanded, meaning the market is in equilibrium and there are no surplus or shortage.