A Profit-Maximizing Firm Should Not Undertake an R&D Project for Which

question 182

Multiple Choice

A profit-maximizing firm should not undertake an R&D project for which the

• A) expected rate of return exceeds its interest-rate cost of funds.
• B) interest-rate cost of funds exceeds the expected rate of return.
• C) expected returns are in the distant future.
• D) expected returns, though potentially very large, are uncertain.

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Definitions:

Drone

An unmanned aerial vehicle (UAV) operated by remote control or onboard computers, used for various purposes including photography, surveillance, and recreation.

Average Variable Costs

The sum of all costs that vary with output levels, when divided by the number of units produced.

Drones

Unmanned aerial vehicles (UAVs) capable of flying without a human pilot aboard, used for various purposes from recreation to military.

Total Variable Costs

Costs that vary directly with the level of production, including materials and labor directly involved in a company's manufacturing process.