As it relates to R&D, a firm's expected-rate-of-return-curve, r,
A)slopes downward because the firm arrays, highest to lowest, the rates of return on R&D activities.
B)slopes upward because of the law of diminishing returns.
C)is a horizontal line.
D)depends on whether it borrows from the bank or uses retained earnings in financing R&D.

Question

Quizplus · Accepted Answer

The expected-rate-of-return-curve for R&D activities slopes downward because firms prioritize their investments in R&D projects, starting with those expected to yield the highest returns and moving towards those with lower expected returns. This prioritization leads to a decreasing rate of return as more projects are undertaken.

As It Relates to R&D, a Firm's Expected-Rate-Of-Return-Curve, R