The company that you manage has already spent $5 million on developing a new product – a website that combines You Tube, Twitter, and Facebook – called You Twit Face. The development is not quite finished. It will cost an extra $3 million to finish development and complete the product. At a recent meeting, your salespeople report that the expected sales of your new product (if you finish) are $7 million total. If you do not finish developing the product you can sell the incomplete product to another company for $2 million. What is the MC of finishing the development? __________________ What is the MB of finishing the development? __________________ Should you finish the product? Why or why not? Use the idea of “thinking at the margin” to explain your answer.

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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2. The company that you manage has already spent $5 million on developing a new product – a website that combines You Tube, Twitter, and Facebook – called You Twit Face. The development is not quite finished. It will cost an extra $3 million to finish development and complete the product. At a recent meeting, your salespeople report that the expected sales of your new product (if you finish) are $7 million total. If you do not finish developing the product you can sell the incomplete product to another company for $2 million. What is the MC of finishing the development? __________________ What is the MB of finishing the development? __________________ Should you finish the product? Why or why not? Use the idea of “thinking at the margin” to explain your answer.

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