The "inverted-U theory" of R&D shows the relationship between
A)marginal benefit and marginal cost of R&D.
B)number of R&D projects and the sources of R&D funds.
C)R&D expenditures and expected return.
D)market concentration ratio and R&D expenditures.

Question

Quizplus · Accepted Answer

The "inverted-U theory" suggests that there is an optimal level of market concentration for R&D expenditures. At low levels of concentration, firms may not have enough resources to invest in R&D. As concentration increases, firms have more resources and incentives to invest in R&D, leading to higher expenditures. However, beyond a certain point, further increases in concentration can reduce the competitive pressure to innovate, leading to a decrease in R&D expenditures. This creates an inverted-U relationship between market concentration and R&D expenditures.

The "Inverted-U Theory" of R&D Shows the Relationship Between