Investment in R&D Activities Can Allow the Firm to Maintain

question 45

Multiple Choice

Investment in R&D activities can allow the firm to maintain and strengthen its competitive position in the face of adverse exchange rate movements.The mechanism for this includes

• A)successful R&D efforts allowing the firm to cut costs and enhance productivity.
• B)R&D efforts leading to the introduction of new and unique products for which competitors offer no close substitutes-since the demand for unique products tends to be highly inelastic the firm would be less exposed to exchange risk.
• C)successful R&D efforts creating a perception among consumers that its product is indeed different from those offered by competitors.Once the firm's product acquires a unique identity,its demand is less likely to be price-sensitive.
• D)all of the options

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Definitions:

Depreciation

The systematic allocation of an asset's cost over its useful life, reflecting its loss of value over time.

Gift Tax

A levy imposed on the act of transferring property from one person to another without receiving full value or any compensation in return.

Purchase Price

The amount of money paid to buy a good, service, or asset; fundamental in calculating the basis for investment or tax purposes.

Capital Loss Deduction

A tax deduction that allows individuals to offset their capital gains with any losses they incurred on investments in a given tax year.