Suppose Canon Inc

question 48

Essay

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?

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Definitions:

Decertification Election

A formal process where employees vote to remove a union as their representative in dealing with their employer.

Neutrality Provision

A legal or regulatory clause ensuring entities, like governments or companies, remain impartial on certain issues.

Union Representative

A union representative is an individual elected or appointed to represent and defend the interests of union members in discussions and negotiations with employers.

National Labor Relations Board

A US federal agency overseeing labor laws related to collective bargaining and unfair labor practices, ensuring employees' rights to organize.