Which of the following supports the contention that monopolistic competitors have a strong incentive to engage in R&D?
A. Entry to monopolistic competitive industries is relatively easy and thus profit from
innovation is quickly competed away.
B. Most monopolistic competitive industries are decreasing-cost industries.
C. The desire to differentiate products from competitors may motivate monopolistic
competitors to engage in R&D.
D. Monopolistic competitors have large retained earnings that are available to finance R&D.
Answer: C
Economics
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