1 Prin of Microeconomics Summer 2018 carlos modley Home Grades Personalized Revi
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1 Prin of Microeconomics Summer 2018 carlos modley Home Grades Personalized Reviews Discussion Course Materials Ten Principles of Economics : Algorithmic End of Chapter Graded Assignment | Read Chapter 1 | Back to Assignment Due Sunday 06.10.18 at 11:45 PM Attempts: Keep the Highest: /1 5. Problems and Applications Q5 The company that you manage has invested $5 million in developing a new product, but the development is not quite finished. At a recent meeting, your salespeople report that the introduction of competing products has reduced the expected sales of your new product to $1.5 million. If it would cost $2 million to finish development and make the product, you development isS go ahead and do so. The most you should pay to complete million Grade It Now Save & Continue Continue without saving Copyright NoticesTerms of Use Privacy Notice Security NoticeAccessibilityExplanation / Answer
If I don’t go ahead with selling the product, I will lose whatever amount I invested in developing it until today. My loss will be 5 million.
If I go ahead with selling the product, I have to finish the development with a further cost of 2 million.
The influx of sales will be 1.5 million.
The net loss will be 1.5 – (5 + 2) = 5.5 million
So you should stop the project, that way you will loose only million.
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