You are a t-shirt designer and have a new design you are excited about. Another company offers to buy your design for $5,000. Or you could produce and sell your own t-shirts with this new design. You estimate you have a 30% chance your t-shirt is a huge success, a 20% chance of your t-shirt is marginally liked and earns gross revenues of $5,500, and a 50% chance your t-shirt is a failure and earns gross revenue of $750. If your t-shirt is a huge success, there is a 55% chance it will earn gross revenues of $20,000, a 20% chance it will earn gross revenues of $25,000, and a 25% chance it will earn gross revenues of $30,000. The cost to produce the t-shirts yourself is $3,500. 

Assume you make decisions using expected value, and you make the optimal decision. 

What is your expected earnings (in $) from your new t-shirt design?

Answer rating: 100% (QA)

To determine the expected earnings from your new tshirt design youll need to calculate the e... View the full answer