You manage a company that has, so far, invested $3 million to develop a product that is not yet finished. After spending the $3 million, you learn that a competing product will reduce the expected profit of your new product to $2 million. It will cost your company $1 million to finish developing the product. Should you finish developing the product? why?
what was the marginal cost of the project, starting at the time that you learned that a competing product would reduce your company's expected sales? What about the marginal gain?