3. Jane has just submitted a first draft of her new book on "Mafia Economics" to two different publishers. Combridge University Press has offered to buy the rights to the final version for $225,000, while Axford University Press is offering only $150,000 for the book, but Axford has also promised to pay her an extra $100,000 if the book sells more than 20,000 copies. Which of the following is true: If Jane estimates that there is an 80 percent chance of selling more than 20,000 copies, then she will definitely choose Axford's offer if she is risk averse. b. If Jane estimates that there is an 80 percent chance of selling more than 20,000 copies, she will definitely choose Axford's offer if she is risk neutral If Jane is risk averse, she will always take Combridge's offer, regardless of the probability of selling more than 20,000 copies. a. C. d. If Jane is risk neutral, she will accept Combridge's offer regardless of the probability of selling more than 20,000 copies. e. Both a. and b. are true.

3. Jane has just submitted a first draft of her new book on "Mafia Economics" to two different publishers. Combridge University Press has offered to buy the rights to the final version for $225,000, while Axford University Press is offering only $150,000 for the book, but Axford has also promised to pay her an extra $100,000 if the book sells more than 20,000 copies. Which of the following is true: If Jane estimates that there is an 80 percent chance of selling more than 20,000 copies, then she will definitely choose Axford's offer if she is risk averse. b. If Jane estimates that there is an 80 percent chance of selling more than 20,000 copies, she will definitely choose Axford's offer if she is risk neutral If Jane is risk averse, she will always take Combridge's offer, regardless of the probability of selling more than 20,000 copies. a. C. d. If Jane is risk neutral, she will accept Combridge's offer regardless of the probability of selling more than 20,000 copies. e. Both a. and b. are true.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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