Question

The decision to innovate O A depends on the marketing department's needs. O B. depends on whether the firm wants to benefit its customers ° C. is unnecessary in a monopolistically competitive market. O D. is based on the marginal cost and the marginal revenue of innovation. E. None of the above answers is correct

Answer both questions

Answer 1

Question 1

In economic terms, decisions are made on the margins.

This marginal analysis scenario indicates that if the marginal benefit from decision exceeds or equal to the marginal cost of decision then decision can be taken otherwise not.

So, in same sense, the decision to innovate is based on the marginal cost and the marginal revenue of innovation.

Hence, the correct answer is the option (D).

Question 2

In economic terms, short-run and long-run are time frames with respect to the production undertaken.

These time frames are not in terms of number of years but are in terms of ability of firm to change its inputs or resources.

If a firm is able to change only some of its resources and not all if it changes its output then it is said to be operating in short-run.

On the other hand, if the firm is able to change all its resources if it changes its output then it is said to be operating in the long-run.

So,

The short-run is the time frame in which some resources are fixed.

Hence, the correct answer is the option (B).