P-TV and QRS-TV are trying to decide whether to air a sitcom or a reality show in a given time slot. Viewers like both sitcoms and reality shows, but sitcoms are more expensive to produce than reality shows since real actors need to be hired. QRS-TV makes its decision first, and then P-TV observes that choice before making its decision. Both stations know all of the information in the decision tree below. 
Suppose QRS-TV enters into an agreement with P-TV that gives QRS-TV the exclusive right to air a reality show during this time slot. QRS-TV would have to pay P-TV ________ in order to persuade P-TV to enter into this agreement.
A. more than zero, but less than $5 million
B. at least $10 million
C. nothing
D. at least $5 million
Answer: D
You might also like to view...
The Fisher equation states that the
A) expected real interest rate minus the expected inflation rate equals the nominal interest rate. B) expected inflation rate plus the nominal interest rate equals the expected real interest rate. C) nominal interest rate equals the expected real interest rate plus the expected inflation rate. D) expected real interest rate equals the expected inflation rate minus the nominal interest rate.
Blanca has her choice of either a certain income of $20,000 or a gamble with a 0.5 probability of $10,000 and a 0.5 probability of $30,000. The expected value of the gamble:
A) is less than $20,000. B) is $20,000. C) is greater than $20,000. D) cannot be determined with the information provided.