Two Professors at a Nearby University Want to Co-Author a New

question 7

Multiple Choice

Two professors at a nearby university want to co-author a new textbook in either economics or statistics. They feel that if they write an economics book they have a 50% chance of placing it with a major publisher where it should ultimately sell about 40,000 copies. If they can't get a major publisher to take it, then they feel they have an 80% chance of placing it with a smaller publisher, with sales of 30,000 copies. On the other hand if they write a statistics book, they feel they have a 40% chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they can't get a major publisher to take it, they feel they have a 50% chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies.
What is the expected payoff for the decision to write the statistics book?

• A) 50,000 copies
• B) 40,000 copies
• C) 32,000 copies
• D) 30,500 copies
• E) 10,500 copies

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Definitions:

Exclusive Legal Right

An exclusive legal right is a privilege granted by law to an individual or entity to engage in a particular activity or to use a particular property, which is protected against infringement or unauthorized use by others.

Patent

is a legal right granted to an inventor or assignee, providing exclusive rights to make, use, or sell an invention for a certain number of years in exchange for public disclosure of the invention.

Pure Monopolist

A market situation where a single seller controls all the supply of a product or service with no close substitutes.

Imperfectly Competitive

Describes market structures that do not meet the conditions of perfect competition, often characterized by the presence of market power held by firms.