A Movie Studio Faces Uncertainty About the Cost of Producing

Multiple Choice

A movie studio faces uncertainty about the cost of producing a film. Its cost can be $40 or $60 million with probabilities .6 and .4 respectively. The box office revenue from the film is also uncertain, either $60 million or $40 with probabilities .3 and .7 respectively. The film's expected profit is

A) $10 million
B) $12 million.
C) $4 million.
D) $16 million.
E) None of these answers is correct.