The Corporate Decision on Type and Level of R&D Activity

question 138

Multiple Choice

The corporate decision on type and level of R&D activity is difficult because

• A) the interest-rate cost of funds is difficult to estimate.
• B) much of corporate R&D is based on the pursuit of science, not on the profit motive.
• C) expected returns lie in the future and are highly uncertain.
• D) total returns and marginal returns greatly diverge.

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Definitions:

Canceling-out Theory

A hypothesis suggesting that effects in one direction are neutralized or mitigated by effects in an opposing direction.

Natural Selection

The process by which organisms that are better adapted to their environment tend to survive and produce more offspring, thus driving the evolution of species.

Depth Cues

Visual or auditory information that helps to determine the distance between the observer and objects in the environment.

Redundancy

The inclusion of extra components or information that are not necessary for functioning, often to ensure reliability or convey additional confirmation.