a. A TV station wants a documentary about the Australian outback. A freelance re

Question

a. A TV station wants a documentary about the Australian outback. A freelance reporter is interested and the two parties negotiate. The trip to Australia, the equipment and everything else necessary for the documentary would cost £10,000, which the reporter would have to pay herself. The TV station offers to pay £25,000 for the documentary later. If the reporter does not sell the documentary to the TV station, she could put it on her own Youtube – Channel and earn £8,000 revenue this way. Assume no binding contract can be written. Will the reporter produce the documentary? Explain your answer.

b. What is a problem such as in a) called? What is the economic “loss” that it causes?

c. What could the TV station do in order to make the documentary happen (other than writing a binding contract)?

d. Give two other examples of how this type of problem can be solved generally. Briefly explain your examples.

Explanation / Answer

a)Will the reporter produce the documentary?

Yes, he will produce it as the cost is 10,000 and he will get 25,000. Plus revenue of 8000 after selling it on the youtube which will not incur any other cost.

Profit = (25000+8000) - 10000 = 23000

b) If a TV station refuses to pay (as there is no binding contract) it later than there will be a problem as he can only earn 8000 but the cost is 10000. So the loss will be -$2000.

c) A TV station can pay him in advance of $2000 which can cover his loss. and write a binding contract.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.