Question

A team of engineers is doing a cost-benefit analysis to determine whether

they should develop new technology. What are two risks to company profits
they should include in their analysis?

Answer 1

When conducting a cost-benefit analysis for new technology development, engineers should consider risks such as upfront development costs and technology obsolescence, as well as weighing private and social benefits and analyzing rates of return.

Step-by-step explanation:

Cost-benefit analysis is a crucial decision-making tool used by a team of engineers to evaluate whether they should develop new technology. Two significant risks to company profits that should be included in this analysis are upfront development costs and the potential for technology obsolescence. Upfront development costs are a direct financial burden, while technology obsolescence represents the risk of the new technology becoming outdated quickly due to rapid advancements, leading to reduced returns on investment.

Another important aspect of the analysis is considering market competition, which might incentivize the creation of disruptive technologies, as seen with the hypothetical company Technotron. However, engineers must also weigh the potential negative externalities, such as the technological divide and security risks associated with technological dependence.

It is also essential to differentiate between private benefits, which accrue directly to the company, and social benefits, which impact the larger society. For example, a private benefit may be increased efficiency, while a social benefit could be job creation or environmental improvements. Analyzing the rates of return on investment is a part of this process, ensuring the profitability aligns with the company's objectives.

Answer 2

1) The risk of high cost due to increased resource requirements

2) The risk of late entry into the (a changed) market

Step-by-step explanation:

The analysis being performed by the engineers = A cost benefit analysis to determine if a new technology should be developed

A cost-benefit analysis is a process of appraising or measuring the advantages, benefits of a policy, action or decision, so as to find the (equilibrium) balance point between the costs of the decision or action

The risk to be considered are;

1) The risk of high cost due to increased resource requirements

The increased cost required for the development of the new technology now which due to the unlikely existence of a similar invention in the market that will give them an advantage of increased profits

2) The risk of late entry into the (a changed) market

The changes in the consumer preferences, market landscape, and the likely introduction into the market of a similar invention by the competition in the near future which will reduce the amount of profits that can be gained from the invention