In the inverted-U theory of R&D, which of the following industry concentration ratios would be most conducive to R&D (as a percentage of firm sales)?
A)1 percent
B)10 percent
C)50 percent
D)70 percent

Question

Quizplus · Accepted Answer

The inverted-U theory suggests that moderate levels of industry concentration, such as a 50 percent concentration ratio, are most conducive to R&D. This is because there is enough competition to spur innovation but also enough market power to recoup the costs of R&D.

In the Inverted-U Theory of R&D, Which of the Following