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Hyuda, an automobile company, has dedicated the majority of this year’s research and development (R&D) budget to an environment-friendly variation of its existing vehicle that runs on diesel. However, the market demand for electric vehicles has soared, as they are more environmentally friendly than diesel vehicles, and hence the profit margin from selling electric vehicles is much higher than that from selling diesel vehicles.

Which of the following statements, if true, gives an economic explanation for Hyuda’s shift in investment to electric vehicle?