The expected-rate-of-return curve for R&D expenditures of a firm slopes downward because of
A) diminishing marginal returns from R&D activities.
B) economies of scale in R&D projects.
C) average fixed costs of R&D projects.
D) the law of supply for R&D expenditures.

Question

Quizplus · Accepted Answer

The expected-rate-of-return curve for R&D expenditures of a firm slopes downward because of diminishing marginal returns from R&D activities. As a firm invests more in R&D, the benefits from each additional dollar spent on R&D begin to decrease, resulting in a decreasing rate of return.

The Expected-Rate-Of-Return Curve for R&D Expenditures of a Firm Slopes