Economists who contend that oligopolists have a strong incentive to engage in R&D say that
A) the undistributed profits of oligopolists give them a source of readily available, relatively low-cost funds for financing R&D.
B) entry barriers enable oligopolists to sustain the profit they gain from innovation.
C) the large size of oligopolists' R&D departments allows them to use specialized, expensive R&D equipment and employ teams of specialized researchers.
D) all of the other answers are true.

Question

Quizplus · Accepted Answer

All of the other choices are true. Oligopolists have undistributed profits that they can use to finance R&D, and entry barriers help sustain their profits from innovation. Also, the large size of their R&D departments allows for specialized, expensive equipment and specialized researchers. Thus, oligopolists have a strong incentive to engage in R&D.

Economists Who Contend That Oligopolists Have a Strong Incentive to Engage