To incentivize R&D,the government proposes to take on a company's costs if its product does not succeed.This would lead to
A)The company developing a lot more products with a low risk of failure
B)The company developing a lot more products with a high risk of failure
C)The company developing no high risk products
D)The company going bankrupt

Question

​To incentivize R&D,the government proposes to take on a company's costs if its product does not succeed.This would lead to
A)​The company developing a lot more products with a low risk of failure
B)The company developing a lot more products with a high risk of failure
C)The company developing no high risk products
D)​The company going bankrupt

Quizplus · Accepted Answer

If the government is going to take on the costs of a failed product, the company will likely take on more high-risk products than they would have without the government's support. The company might be more inclined to take risks if it doesn't have to bear the financial consequences of a failed product. Hence, the company will develop more high-risk products.

​To Incentivize R&D,the Government Proposes to Take on a Company's

To Incentivize R&D,the Government Proposes to Take on a Company's