Question: 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

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?

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