Which of the following supports the contention that pure competitors have a strong incentive to engage in R&D?
A. Entry to purely competitive industries is easy and thus profit from innovation is quickly
competed away.
B. Pure competitors cannot risk being complacent about innovation because a new product,
production technique, or distribution method could undermine their normal profit and drive
them out of the market.
C. Most purely competitive industries are increasing-cost industries.
D. Pure competitors are happy to earn only a normal profit.
Answer: B
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