Because Firms Can Free Ride on the Research and Development

question 163

Multiple Choice

Because firms can free ride on the research and development of other firms

• A)firms choose a level of research and development where the marginal cost of research is equal to the economy's marginal return of research.
• B)firms choose a level of research and development where the marginal cost of research is above the economy's marginal return of research.
• C)firms choose a level of research and development where the marginal cost of research is below the economy's marginal return of research.
• D)firms choose a level of research and development where the marginal cost of research is below the individual firm's marginal return of research.

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Definitions:

Risk-Averse

A condition where an individual prefers outcomes with known probabilities over outcomes with unknown probabilities, typically avoiding higher risk.

Total Utility

The cumulative satisfaction or pleasure derived by a consumer from consuming a given amount of goods or services.

Income Fall

A decrease in the amount of money received by an individual, household, or entity, typically referring to earnings over a certain period.

Risk Aversion

A preference for guaranteed outcomes over those with uncertainty, even if the uncertain outcome might offer a higher expected return.