Ontel Engineers Proposed Developing a 10-Gigahertz Microprocessor in Early 2011

question 164

Multiple Choice

Ontel engineers proposed developing a 10-Gigahertz microprocessor in early 2011 at a cost of $20 million for a working prototype.By mid-2012,the $20 million had been spent with no prototype.The engineers request an additional $10 million to finish the project.For convenience,assume the marginal cost of producing the chip once it is developed is zero.
-A senior executive at Ontel argues that the engineers should only be granted the additional $10 million if Ontel can collect $30 million in revenues after the chip is developed.The executive's argument is

• A) correct.
• B) incorrect;Ontel need only collect $20 million.
• C) incorrect;the $20 million already spent is a marginal cost and should be ignored.
• D) incorrect;the $20 million already spent is a sunk cost and should be ignored.
• E) possibly correct;insufficient information to say.

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Definitions:

Food Intake

The amount of food consumed by an individual or organism, which can affect health and weight status.

Anorexia Nervosa

An eating disorder characterized by an intense fear of gaining weight and a distorted body image, leading to severe restriction of food intake.

Bulimia Nervosa

An eating disorder characterized by recurrent episodes of binge eating followed by compensatory behaviors such as self-induced vomiting, excessive exercise, or the misuse of laxatives.

Binge Eating

Binge Eating is characterized by the consumption of large quantities of food in a short period of time, often accompanied by a sense of loss of control over eating, and is a key feature of binge eating disorder.