Microeconomics
Microeconomics
2nd Edition
ISBN: 9781259813337
Author: KARLAN, Dean S., Morduch, Jonathan
Publisher: Mcgraw-hill Education,
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Chapter 1, Problem 5PA
To determine

To find: the amount which can be spent to complete the product development.

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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    go ahead and do so. The most you should pay to complete development is   million.
Many clothing stores purchased new fashions from clothing manufacturers back in the Fall, expecting to sell new fashions to consumers this Spring. Because of the pandemic, however, people are not shopping for new clothing fashions as much as the clothing retailers had expected. So these stores have on hand lots of new clothing, just sitting on their shelves, going unsold. The question for these retailers is what to do with this clothing. One option is to hang on to it and hope to sell it to consumers next year. Another option is to sell the clothing now to so-called “deep discount retailers” such as Beall’s, Marshall’s, T.J. Maxx, and Ross Dress for Less. The problem with selling to deep discount stores is that the clothing retailers will probably receive less money than they paid to get the clothing from the manufacturers. Explain whether it makes good economic sense for clothing retailers to sell their unsold clothing to deep discounters for less than they paid for it. Identify the…
Purposeful behavior means that:        people are selfish in their decision-making.        people weigh costs and benefits to make decisions.        people are immune from emotions affecting their decisions.        decision-makers do not make mistakes when weighing costs and benefits.
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