innovative firm knows that it will usually have a temporary edge over its competitors and thus an ability to

earn above-normal profits before competitors can catch up.

In certain cases, however, competition can discourage new technology, especially when other firms can

quickly copy a new idea. Consider a pharmaceutical firm deciding to develop a new drug. On average, it can

cost $800 million and take more than a decade to discover a new drug, perform the necessary safety tests, and

bring the drug to market. If the research and development (R&D) effort fails—and every R&D project has some

chance of failure—then the firm will suffer losses and could even be driven out of business. If the project

succeeds, then the firm’s competitors may figure out ways of adapting and copying the underlying idea, but

without having to pay the costs themselves. As a result, the innovative company will bear the much higher
{"source": "downloads\\business\\economics\\Microeconomics3e.pdf", "total_pages": 597, "upload_timestamp": "2026-02-07T15:37:44.339247", "batch_upload": true, "creator": "PDFMiner", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "producer": "Prince 14.2 (www.princexml.com)", "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "creationdate": "2022-12-07T14:15:44-06:00", "file_name": "Microeconomics3e.pdf", "file_size_mb": 26.99, "file_type": ".pdf", "title": "Principles of Microeconomics 3e", "uploaded_via": "batch_uploader", "moddate": "2022-12-07T14:23:05-06:00"}