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# global studios is thinking of producing a megafilm, Aquaworld, which could be a mega hit or a mega flop. profit is uncertain for two reasons:

global studios is thinking of producing a megafilm, Aquaworld, which could be a mega hit or a mega flop. profit is uncertain for two reasons: (1)the cost of producing the film may be low or high, and (2)the market reception for the film may be strong or weak. there is a .5 chance of low costs (C) and a .5 chance of high costs. the probability of strong demand (D) is .4; the probability of weak demand is .6. the studios profits (in millions of dollars) for the four possible outcomes are shown in the table.

low C/strong D = 80
low C/weak D = 10
high C/strong D = 0
high C/weak D = -70

Should the studio produce the film??

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