Suppose that a firm's legal staff concludes that a new product that the firm is developing is patentable.Graphically,this new information would shift the firm's expected-rate-of-return curve on R&D to the:

A) right and reduce its optimal amount of R&D.
B) right and increase its optimal amount of R&D.
C) left and increase its optimal amount of R&D.
D) left and reduce its optimal amount of R&D.

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Destiny James · Accepted Answer

Final Answer : B, Explanation :  If a new product is patentable, it means that the firm has a potential monopoly over its sale and production, leading to higher expected profits. This would shift the expected-rate-of-return curve to the right, indicating that the firm can achieve a higher return on its R&D investment. As a result, the optimal amount of R&D would increase since the potential payoff is greater.

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