Two professors at a nearby university want to coauthor a new textbook in either economics or statistics. They feel that if they write an economics book, they have a 50 percent chance of placing it with a major publisher, and it should ultimately sell about 40,000 copies. If they cannot get a major publisher to take it, then they feel they have an 80 percent chance of placing it with a smaller publisher, with ultimate sales of 30,000 copies. On the other hand, if they write a statistics book, they feel they have a 40 percent chance of placing it with a major publisher, and it should result in ultimate sales of about 50,000 copies. If they cannot get a major publisher to take it, they feel they have a 50 percent chance of placing it with a smaller publisher, with ultimate sales of 35,000 copies.
What is the expected value for the optimum decision alternative?
A)50,000 copies
B)40,000 copies
C)32,000 copies
D)30,500 copies
E)10,500 copies

Question

Quizplus · Accepted Answer

For the economics book, the expected sales are calculated as follows: - 50% chance of major publisher * 40,000 copies = 20,000 copies- 50% chance of not getting a major publisher * 80% chance of smaller publisher * 30,000 copies = 12,000 copiesTotal expected sales for economics book = 20,000 + 12,000 = 32,000 copiesFor the statistics book, the expected sales are calculated as follows:- 40% chance of major publisher * 50,000 copies = 20,000 copies- 60% chance of not getting a major publisher * 50% chance of smaller publisher * 35,000 copies = 10,500 copiesTotal expected sales for statistics book = 20,000 + 10,500 = 30,500 copiesTherefore, the optimum decision alternative based on expected sales is to write the economics book, with an expected value of 32,000 copies.

Two Professors at a Nearby University Want to Coauthor a New