The Head of Operations for a Movie Studio Wants to Determine

question 70

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 is the expected value of selecting script 1?

• A)$15,000,000
• B)$9,060,000
• C)$8,400,000
• D)$7,200,000
• E)$6,000,000

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Definitions:

Childhood Repression

A defense mechanism identified by psychoanalytic theory, where unpleasant childhood memories are unconsciously blocked out as a protective measure.

Aversive Conditioning

A form of behavior modification that involves using unpleasant stimuli to discourage undesirable behaviors.

Desensitizing

The process of reducing sensitivity or responsiveness to an external stimulus, often used as a therapeutic technique.

Systematic Desensitization

A behavioral therapy method used to reduce phobias, anxiety, and fears through gradual exposure to the feared object or situation.