Question

Suppose that a firm invests $5 million in the development of a new product that generates only about $250,000 in revenue after a full year on the market. The firm only has a patent for one year and other firms are likely to start producing similar products. Which of the following is the most rational decision for the firm to make?

Answer 1

Complete Question

The complete question is shown on the first uploaded image

Answer:

The correct option is C

Step-by-step explanation:

The correct option is

The firm should forget the new product, accept the loss of the investment and work on innovations that show signs of being more profitable.

The reason for this is that the period that the company is to recover the funds allocated to R &D is over i.e the patent(which is one of the most via way to recover their funds only last for one year so investing more resource on the product will lead to more loss for the company instead of a gain