The Head of Operations for a Movie Studio Wants to Determine

question 10

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. She feels that script #1 has a 70% chance of earning $100 million over the long run, but a 30% chance of losing $20 million. If this movie is successful, then a sequel could also be produced, with an 80% chance of earning $50 million, but a 20% chance of losing $10 million. On the other hand, she feels that script #2 has a 60 % chance of earning $120 million, but a 40% chance of losing $30 million. If successful, its sequel would have a 50% chance of earning $80 million and a 50% chance of losing $40 million. As with the first script, if the original movie is a "flop," then no sequel would be produced.
What is the expected payoff from selecting script #2?

• A) $150 million
• B) $90.6 million
• C) $84 million
• D) $72 million
• E) $60 million

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Definitions:

Wilhelm Wundt

Known as the "father of modern psychology," he founded the first formal laboratory for psychological research at the University of Leipzig, marking the beginning of psychology as a separate and distinct science.

Mary Whiton Calkins

An American psychologist who became the first woman to serve as the President of the American Psychological Association.

Margaret Floy Washburn

The first woman to earn a PhD in Psychology and known for her work in animal behavior and motor theory development.

Jean Piaget

A Swiss psychologist known for his pioneering work in child psychology and cognitive development.