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a. Neither pure competition nor pure monopoly is very conducive to a great deal of R&D spending and innovation because for competitive firms, the expected

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a. Neither pure competition nor pure monopoly is very conducive to a great deal of R&D spending and innovation because for competitive firms, the expected rate of return on R&D may be low or even negative, while for monopolies there is little means to engage in R&D. profit rewards from innovation may be exaggerated by existing or entering firms, while monopolies have little market power, which creates an incentive to engage in R&D. the large number of firms makes it difficult to identify a useful R&D project, while monopolies have no other firms to collaborate with. eBook profit rewards from innovation may be diminished by existing or entering firms, while monopolies have market power, which creates a disincentive to engage in R&D. Print b. Oligopoly might be more favorable to R&D spending and innovation than either pure competition or pure monopoly because firms in this type of industry are References O able to collude and take advantage of shared information. O small in size and more responsive to market conditions. large in size and there are barriers to entry. These can lower per-unit production costs and help to keep some of the profits of innovation. large in size and there are barriers to entry. These can increase per-unit production costs and help to keep some of the profits of innovation. c. The inverted-U theory suggests that R&D expenditures as a percentage of sales rise with industry concentration until the four-firm concentration ratio reaches about 50 percent, Indicating that R&D expenditures occur in all types of industry structures. . 90 percent, suggesting that most R&D expenditures occur in industries that are not monopolized. O 30 percent, suggesting that small firms are more responsible for significant R&D expenditures. O 50 percent, suggesting that monopolies are not responsible for significant R&D expenditures

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