One reason that investment in innovation is often considered to have increasing marginal returnsis becauseA) new products increase rms' pro ts.B) R&D costs are negligible relative to rms' total costs.C) innovation is mostly through "leaning by doing."D) new ideas or innovations can spawn ever further new ideas and innovations.E) after the initial investment is made, subsequent investors face more dif cult and expensiveproduction problems.imam.ah
Question
One reason that investment in innovation is often considered to have increasing marginal returnsis becauseA) new products increase �rms' pro�ts.B) R&D costs are negligible relative to �rms' total costs.C) innovation is mostly through "leaning by doing."D) new ideas or innovations can spawn ever further new ideas and innovations.E) after the initial investment is made, subsequent investors face more dif�cult and expensiveproduction problems.imam.ah
Solution
The statement that investment in innovation often has increasing marginal returns is primarily due to option D) new ideas or innovations can spawn ever further new ideas and innovations.
Here's why:
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When a company invests in innovation, it often leads to the development of new ideas or products.
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These new ideas or products can then inspire further innovations, creating a cycle of continuous improvement and development.
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This process can lead to increasing marginal returns because each new innovation can potentially generate higher profits than the last.
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This is different from traditional investments, where the marginal returns may decrease over time due to factors like market saturation or increased competition.
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Therefore, the potential for continuous development and improvement makes investment in innovation a strategy that can lead to increasing marginal returns.
Please note that while options A, B, C, and E may be true in some cases, they do not directly explain why investment in innovation can lead to increasing marginal returns.
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