Big Cure and Little Cure Are Both Pharmaceutical Companies

question 67

Multiple Choice

Big Cure and Little Cure are both pharmaceutical companies. Big Cure presently has a potential "blockbuster" drug before the Food and Drug Administration (FDA) waiting for approval. If approved, Big Cure's blockbuster drug will produce $1 billion in net income for Big Cure. Little Cure has ten separate, less important drugs before the FDA waiting for approval. If approved, each of Little Cure's drugs would produce $50 million in net income. The probability of the FDA approving a drug is 50%. What is the expected payoff for Little Cure's ten drugs?

• A) $250 million
• B) $50 million
• C) $1 billion
• D) $0

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Definitions:

Observational Theory

A framework suggesting that learning occurs through observing the behaviors of others and the outcomes of those behaviors.

Sensorimotor Stage

The first of the four stages in Jean Piaget's theory of cognitive development, occurring from birth to about 2 years of age, where infants learn about the world through their senses and motor activities.

Formal Operational

The stage of cognitive development in Piaget's theory where individuals learn to think abstractly and reason about hypothetical situations.

Concrete Operational

Describes a stage in Piaget's theory of cognitive development during which children develop logical but not yet abstract thinking.