How does the cost of financial capital influence innovative research and develop

ID: 1198863 • Letter: H

Question

How does the cost of financial capital influence innovative research and development activities in a competitive market?

at a high cost, firms demand a large quantity, as R&D projects return high rates.

at a low cost, firms demand a large quantity, as R&D projects will likely return a higher rate.

financial capital at a high cost means more projects are likely to pay a much higher return rate.

at a low cost, the firm receives only small private benefits from investing in R&D.

at a high cost, firms demand a large quantity, as R&D projects return high rates.

at a low cost, firms demand a large quantity, as R&D projects will likely return a higher rate.

financial capital at a high cost means more projects are likely to pay a much higher return rate.

at a low cost, the firm receives only small private benefits from investing in R&D.

Cost of capital represents a risk-return trade-off: A high cost of capital indicates higher risk, therefore higher return required by investors.

So, financial capital at a high cost means more projects with more likely higher rate of return.

Option (3) is correct.

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