Suppose Canon Inc decided to invest 45 billion yen in developing and launching a new model of its digital camera, expecting that it will bring additional sales of 60 billion yen
The company has already invested 38 billion yen when the marketing department suddenly finds out that the introduction of a similar camera by Sony will reduce Canon's expected additional sales to 30 billion yen. The company's management is trying to decide whether to continue investing in the new product or close the project. Canon hires you as an economic consultant. So, think like an economist to help the company's management make their decision: a) At this point in time, what is Canon's marginal cost of introducing the new product? b) What is Canon's marginal benefit from introducing the new product? c) Will you advise Canon to finish the project and introduce the new product? Why or why not? What principles of economic thinking will help you analyze the situation and make the right choice?
a) Canon's marginal cost is the additional investment needed to finish the project, which is 7 billion yen.
b) Canon's marginal benefit is the benefit that arises from the new product, the additional revenue from sales, which in the changed situation is expected to be 30 billion yen.
c) The principle of choosing at the margin will hel
You might also like to view...
Which of the following assertions about pollution is generally agreed with by economists?
A) Pollution is never a problem because those who pollute and the victims of pollution can always bargain with one another and arrive at a suitable outcome. B) Due to the demand for products made by those who pollute, it is best to not restrict pollution. C) The problem we face in dealing with pollution is determining the optimal amount of pollution. D) The ideal amount of pollution is no pollution.
Contracting for Lawn Mowing Services An apartment owner advertises for lawn mowing services for a number of apartments he owns. He has some idea of the going price and so he advertises that he will pay $100 per month per apartment complex. So why is he disappointed that the winning contractor only provides minimal services?
Which of the following results from providers having more information about treatment alternatives than their patients?
a. Principle-agent problem. b. Rational ignorance. c. Externalities. d. Adverse selection. e. The substitution effect.
A tax where the percentage of income paid in taxes is the same regardless of the size of the income is a:
a. proportional tax. b. regressive tax. c. progressive tax. d. mix of a and b.