Firms that set prices equal to marginal costs will usually recover all of their R&D costs.

Name: Firms that set prices equal to marginal costs will usually recover all of their R&D costs.
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Question

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Setting prices equal to marginal costs may result in covering variable costs, but it may not cover fixed costs such as R&D expenses. Therefore, firms need to set prices above marginal costs to recover R&D costs and make a profit.

Firms That Set Prices Equal to Marginal Costs Will Usually