A market research institute determines that 80% of all newly introduced products flop in a certain branch. But even when the decision to mass produce a new product is based on the results of a test market, mistakes happen. From past experience, we know that 70% of successful products performed well in the test market. In 20% of cases, they performed mediocrely, and in 10% of cases they performed poorly. With flops, it’s exactly the opposite.

(a) Represent the individual probabilities using a probability tree.

(b) How great is the probability that test market success will mean general market success? (c) A product achieves good test market results. What are the odds that it nevertheless flops?

(d) What is the probability that a product performs well in the test market or turns out a flop?

(e) What is the probability that a product performs poorly in the test market and is a flop?