As it relates to the R&D decision, the interest-rate cost-of-funds curve
A)usually slopes downward.
B)is the marginal cost element in the MB = MC decision framework.
C)indicates a constant rate of return, r.
D)reflects the interest rate on bank loans but not the implicit interest rate on the use of retained earnings.

Question

Quizplus · Accepted Answer

The interest-rate cost-of-funds curve is considered the marginal cost element in the marginal benefit (MB) equals marginal cost (MC) decision framework. This is because it represents the cost of the additional funds needed for investment in R&D or any other project, which should be compared to the marginal benefit of that investment to make an optimal decision.

As It Relates to the R&D Decision, the Interest-Rate Cost-Of-Funds