Learning how to use software takes time. So once customers have learned to use a particular software package, it is easier to sell them software upgrades than to convince them to switch to new software. What implications does this have for expected rates of return on R&D spending for software firms developing upgrades versus firms developing imitative products?

Learning how to use software takes time. So once customers have learned to use a particular software package, it is easier to sell them software upgrades than to convince them to switch to new software. What implications does this have for expected rates of return on R&D spending for software firms developing upgrades versus firms developing imitative products?

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter3: Benefits, Costs, And Decisions

Section: Chapter Questions

Problem 2MC

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(i) A business manager determines that t months after production begins on a new product,the number of units produced will be P thousand, where P(t) =6?2 + 5?(? + 1)2.What happens to production in the long run ?(ii) A ruptured pipe in a North Sea oil rig produces a circular oil slick that is y meters thick at adistance x meters from the rupture. Turbulence makes it difficult to directly measure thethickness of the slick at the source (where x = 0), but for x > 0, it is found thaty =0.5(x2 + 3x)x3 + x2 + 4x . Assuming the oil slick is continuously distributed, howthick would you expect it to be at the source?