Schumpeter argues that the rate of technological change is likely to be greater in imperfectly competitive industries because imperfectly competitive firms
A) earn profits that support expenditures on research and development.
B) lack the power necessary to keep rivals from imitating their innovations.
C) have a vested interest in maintaining demand for existing products.
D) use their power to keep out rivals who would be more inclined to use new techniques.
E) are composed of a large number of independent decision-making units that are less inclined to be conservative.

Question

Quizplus · Accepted Answer

Schumpeter argued that imperfectly competitive firms that earn profits are more likely to invest in research and development to maintain their market power. In contrast, perfectly competitive firms would have a smaller incentive to innovate as profits are driven down to zero in the long run.

Schumpeter Argues That the Rate of Technological Change Is Likely