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Report

Ephrem Bedane

California State University

BUS302
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Q1. Assume that a contract exists between Tommy and the Royal Theater. Further assume

that one of the terms of the contract provides that the movie will begin at 1 PM. What

liability, if any, does Royal Theater have for fraud?

In any valid contract, it is important for all the parties involved to make sure that they fulfil their

obligations. In this case, there exists a contract between Tommy and the Royal Theatre. The

contract is that Tommy should pay $9 to watch a movie that starts at 1PM. In return, the Royal

Theatre needs to make sure that the movie actually starts at the already advertised time. The

theater is contractually required to start the movie at the designated hour if Tommy and the

Royal Theater's contract specifies that it will start at 1 PM. Failure to do this, it can be deemed

fraud if the cinema purposefully shows 20 minutes of ads ahead of the film. This is because it is

deceiving Tommy and other customers about the real start time. Fraud is the deliberate deception

of another party with the aim to cause them loss. Tommy already paid for a movie that was

supposed to start at 1 PM in this instance, but what he got was ads. In the receipt he received,

there was no other information shared other than the start time. When Tommy paid for the

movie, he was not aware that there would be adverts shown. The theater may have committed

fraud if its acts were viewed as deceptive and dishonest. Deliberately showing adverts can be

interpreted as engaging in false advertising. As a result, if Tommy was lied to about the movie's

start time in the contract on purpose, the Royal Theater might be held accountable for fraud.

Q. 2. In light of this result, what course of action should the consortium adopt? Justify your

conclusion by applying a statistical evaluation of the accuracy of your result.

Initially, the consortium had made a decision that if the number of complainants or dissatisfied

moviegoers was more than 10%, they would consider negotiating a settlement and try to prevent

Tommy from proceeding with the case. In the survey conducted, it was found that 6% of the
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moviegoers were dissatisfied with adverts before the movie. Based on this result, it is evident the

predetermined threshold of 10% has not been met. The small proportion of dissatisfied

moviegoers indicates that Tommy's opinion might not represent a significant portion of

moviegoers. This weakens the basis for a class action lawsuit. Therefore, based on the statistical

evaluation of the survey results, the consortium should proceed with defense rather than

considering a settlement.

Q. 3. When would the consortium make a Type I error? A Type II error?

To understand the type of error that the consortium would make, it is important to know the

hypothesis used in analyzing the survey results. The hypothesis, in this case, would be; the rate

of dissatisfaction among moviegoers is less than 10%. This will stand for the null hypothesis. A

type I error occurs when the null hypothesis is incorrectly rejected. In this case, the consortium

will make a Type I error if they reject the claim that rate of dissatisfaction among moviegoers is

less than 10% when it is actually less than 10% (6%). A type II error, on the other hand, occurs

when we fail to incorrectly fail to reject the null hypothesis. In this case, the consortium would

make a Type II error if it incorrectly fails to reject the null hypothesis and concludes that the

dissatisfaction rate is not substantial (less than 10%) based on the survey results when, in fact, it

is.

Q. 4. Would your answer to Question 2 change if, instead, 300 patrons had been randomly

surveyed and 18 out of the 300 patrons agreed with Tommy and resented the ads? Explain.

In Question 2, it was found that 6% of the patrons were dissatisfied with ads at the beginning of

the movie. The new survey results indicate that 18 of 300 patrons were dissatisfied. This is 6% of

all the patrons. As a result, the answer will not change. Even though the sample is larger, 6% of
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them still indicate that they resented the ads. The use of a larger sample in this case will inform

the consortium that indeed the number of people that are dissatisfied with ads was less than 10%.

Q. 5. Identify any ethical issue(s) that may be involved in showing twenty minutes of

commercials before the screening of the movie. Evaluate the ethical issue(s) presented in

the case using one or more of the approaches to ethical decision making discussed in class

One key issue in this case is misleading or false advertising. Displaying twenty minutes of ads

before to the movie starts can be interpreted as misleading advertising. The theatre misleads

customers about the movie's true start time, which could irritate and dissatisfy patrons like

Tommy, by promoting the film to begin at 1:00 PM but instead running ads. The theater's

decisions could be assessed according to how they would affect each stakeholder by applying the

utilitarian approach to ethical decision-making. Selling advertising spots may bring in money for

the theater, but there may be a negative overall effect on patron satisfaction and faith in the

theater's integrity. This approach would consider whether the benefits of showing commercials

outweigh the harm caused to patrons and whether alternative actions could achieve a better

balance of interests, such as limiting the duration of commercials or clearly communicating the

start time of the movie.

Q. 6. What changes do you recommend that Royal Theater make in the future to improve

its business, both in terms of long-term profitability and customer relations?

One key area that Royal Theatre can work on is being honest and transparent in its operations.

This can be achieved by clearly communicating the start time and detailing the amount of time

that would be dedicated to adverts. If there are any delays that might force a movie not to start at
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the designated time, it is important to communicate in advance. It is also important to provide

disclaimers on tickets informing patrons that movies might delay for certain reasons.