Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 13

In mid-2009,the Obama administration announced it would cancel orders for a new fleet of presidential helicopters. About $3 billion had already been spent on developing the helicopters,which had special protective and telecommunications features. But another $8 billion would have been needed to complete the project and deliver the fleet. The administration suggested it might look for a less expensive design and start from scratch. Some media commentators criticized the decision,arguing that cancelling the project would mean wasting the $3 billion already spent.
a. Suppose that starting from scratch on a new proposal that would be just as good as the original would cost a total of $5 billion from beginning to end. Which would be the wiser choice-sticking with the original or starting from scratch? Why?
b. Would your answer change if the new proposal would cost a total of $10 billion? Why or why not?