For what range of probability that the new cable network will be successful will she select the mixed media strategy?
A)0 - .4
B)0 - .55
C).4 - .7
D).55 - 1
E).7 - 1

Question

Quizplus · Accepted Answer

Since the mixed media strategy has a cost of $500,000, it should only be selected if the probability of success is high enough to justify the cost. Assuming that the expected value of the pure cable strategy is $1,000,000, we can use the formula for expected value to find the breakpoint for the mixed media strategy:

500,000 + (1 - p) * 0.5 * 1,500,000 = p * 1,000,000

Solving for p, we get:

p = 0.7

Therefore, the mixed media strategy is only justified for probabilities of success greater than 0.7. Choice C represents this range of probabilities.

For What Range of Probability That the New Cable Network