The Head of Operations for a Movie Studio Wants to Determine

question 160

Multiple Choice

The head of operations for a movie studio wants to determine which of two new scripts they should select for their next major production. (Due to budgeting constraints, only one new picture can be undertaken at this time.) She feels that script 1 has a 70 percent chance of earning about $10,000,000 over the long run, but a 30 percent chance of losing $2,000,000. If this movie is successful, then a sequel could also be produced, with an 80 percent chance of earning $5,000,000, but a 20 percent chance of losing $1,000,000. On the other hand, she feels that script 2 has a 60 percent chance of earning $12,000,000, but a 40 percent chance of losing $3,000,000. If successful, its sequel would have a 50 percent chance of earning $8,000,000, but a 50 percent chance of losing $4,000,000. Of course, in either case, if the original movie were a flop, then no sequel would be produced.
What would be the total payoff if script 1 were a success, but its sequel were not?

• A)$15,000,000
• B)$10,000,000
• C)$9,000,000
• D)$5,000,000
• E)$−1,000,000

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Definitions:

Necessaries

Necessaries refer to essential items that a person requires for basic sustenance and living, such as food, clothing, and shelter.

Contracts With Minors

Agreements made with individuals under the age of majority, which are generally voidable at the discretion of the minor, with certain exceptions.

Basic Medical Services

Basic medical services are essential healthcare services that include preventive, diagnostic, and therapeutic care to maintain or improve an individual's health.

Adjudicated Insane

refers to the legal determination that an individual is mentally incapable of managing their own affairs or standing trial due to mental illness.