Which of the following supports the contention that pure competitors have a weak incentive to engage in R&D?
A)Entry to purely competitive industries is easy, and thus profit from innovation is quickly competed away.
B)In pure competition, products are already highly differentiated.
C)Most purely competitive industries are increasing-cost industries.
D)Pure competitors are happy to earn only a normal profit.

Question

Quizplus · Accepted Answer

In a purely competitive market, the ease of entry means that any profits gained from innovation can be quickly eroded as new competitors enter the market and adopt the same innovations, reducing the incentive for firms to invest in R&D.

Which of the Following Supports the Contention That Pure Competitors