There Is a Concern That Research and Development May Be

question 6

Multiple Choice

There is a concern that research and development may be reduced as a result of the new requirements in AASB 138 because:

• A) Companies will not have the cash available to pay for the research expenses up-front.
• B) Recognising expenses early will allow for larger profits later, which will help smaller firms.
• C) The 'horizon problem' suggests managers will not invest in long-term projects that do not immediately increase profits.
• D) Shareholders are only interested in short-term profits and will not be impressed by strategies that attempt to increase the long-term value of their shares.
• E) None of the given answers.

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Definitions:

Market Price

The market price is the current price at which an asset or service can be bought or sold, determined by the forces of supply and demand in the market.

Reservation Price

The maximum amount a consumer is willing to pay for a good or service, beyond which they will not purchase the product.

Price Discrimination

The strategy of selling the same product to different customers at different prices based on factors like willingness to pay, not costs.

Discrete Pricing

Discrete pricing refers to the practice of setting prices at fixed amounts rather than having a continuous range of prices, often seen in goods sold in whole units rather than continuous quantities.