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This is a classic microeconomics case study in opportunity cost and externalities. From an accounting perspective, yes, money was coming in that exceeded expenses in labor and overhead. But the opportunity cost of the effort to support it -- as well as the negative externalities caused by the distraction effect (as well as the negative impact it may have on their brand) -- means that the $75K figure is more of a canard.

If I was a Microecon professor with a 101 class coming up, I know I'd have this article spiked and ready to use for an upcoming semester.




If I was Marketing professor...


Finance professor: In finance you calculate "Net Present Values" of project and you take every project with an NPV > 0, if they aren't mutually exclusive.

In this case it is arguably a scale problem. You have the company being only able to concentrate on one thing at a time, and even though the product is profitable with NPV > 0, there are better projects out there to take with an even bigger NPV, even if the rate of return might be reduced.

It's kind of like you have a block of land, do you want to setup a park that charges money to enter or build a skyscraper? The park has a 200% rate of return and the skyscraper only 15%.




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