The Table Shows the Rate of Return and R&D Spending

question 173

Multiple Choice

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds falls from 10 percent to 6 percent. What will happen to the optimal amount of R&D spending?

• A)It increases from $24 billion to $36 billion.
• B)It increases from $24 billion to $42 billion.
• C)It decreases from $36 billion to $24 billion.
• D)It decreases from $42 billion to $24 billion.

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Definitions:

On-the-Job Training

Training provided to employees while they perform their regular jobs, allowing them to learn and earn simultaneously.

Physical Capital

Tangible assets used in the production of goods and services, such as machinery, buildings, and infrastructure.

Man-Made Resources

Resources created by humans through processing or altering natural materials, which are used to produce goods and services.

Production Process

The method and sequence of operations involved in the production of a good or service.