Team will use live audience in previewing

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A local TV studio is deciding on a possible new TV show. A successful TV show earns the station about $550,000, but if it is not successful, the station loses about $200,000. Of the previous 200 shows reviewed by the local TV station, 75 turned out to be successful shows, and 125 turned out to be unsuccessful TV shows. For a cost of $65,000, the local station can hire a market research team; this team will use a live audience in previewing the TV pilots to determine whether the viewed TV show will be successful. Past records show that market research predicts a successful TV show about 85% of the time that the TV show was actually successful and predicts an unsuccessful show 75% of the time that it turned out to unsuccessful. How should the local TV studio maximize its profit?

Reference no: EM132014509

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