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 decision alternative 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

Question

Quizplus · Accepted Answer

The expected value for the decision to write the statistics book is calculated as follows: For a major publisher, the expected sales are 50,000 copies with a 40% chance, which equals 20,000 copies (0.4 * 50,000). For a smaller publisher, the expected sales are 35,000 copies with a 50% chance, which equals 17,500 copies (0.5 * 35,000). Adding these together gives an expected value of 37,500 copies, not 30,500 as initially stated. My mistake in the calculation led to an incorrect answer choice being provided. The correct calculation should indeed reflect the accurate expected value based on the probabilities and outcomes given for the statistics book option.

Two Professors at a Nearby University Want to Coauthor a New