Question 1

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

Accepted Answer

A) True 
 B)False

Question 2

Inventions and innovations can both be patented.

Accepted Answer

A) True 
 B)False

Question 3

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later.The firm will

Accepted Answer

A)  not undertake the R&D expenditure if its interest-rate cost of borrowing is 8 percent.
B)  undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent.
C)  undertake the R&D expenditure if its interest-rate cost of borrowing is 20 percent.
D)  undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent.E) B) and D)
F) A) and C)

Question 4

About percent of business R&D spending is for basic research.

Accepted Answer

A)  1
B)  5
C)  20
D)  75E) None of the above
F) A) and B)

Question 5

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

Accepted Answer

A)  number of firms in the industry.
B)  length of time for government patents.
C)  scientific character of the industry.
D)  imitation problem in the industry.E) A) and C)
F) None of the above

Question 6

The expected-rate-of-return curve for R&D expenditures of a firm slopes downward because of

Accepted Answer

A)  diminishing marginal returns from R&D activities.
B)  economies of scale in R&D projects.
C)  average fixed costs of R&D projects.
D)  the law of supply for R&D expenditures.E) None of the above
F) A) and C)

Question 7

The conjecture that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall as industry concentration rises is known as the

Accepted Answer

A)  inverted-U theory of R&D.
B)  average product of R&D theory.
C)  bell-shaped-curve theory of product innovation.
D)  theory of increasing and diminishing returns.E) B) and C)
F) A) and B)

Question 8

A firm decides to make a $20 million expenditure on research and development that will create a new product.This product is expected to increase the firm's revenues by a total of $24 million in the next year.The firm also estimates that the production cost of the new product will be $22 million.If the firm has to take out a loan to finance the project, what is the highest interest rate it will pay and still do the project among the choices given?

Accepted Answer

A)  8.3 percent
B)  9.1 percent
C)  10 percent
D)  20 percentE) C) and D)
F) B) and D)

Question 9

Large, well-established firms are more likely to use retained earnings to finance R&D, while small start-up firms are more likely to rely on venture capital.

Accepted Answer

A) True 
 B)False

Question 10

Technological advance is a three-step process of

Accepted Answer

A)  product development, production, and marketing.
B)  creative destruction, start-ups, and patenting.
C)  breakthrough, consolidation, and distribution.
D)  invention, innovation, and diffusion.E) A) and B)
F) A) and C)

Question 11

Entrepreneurs

Accepted Answer

A)  work exclusively in government and university R&D laboratories.
B)  often form small companies called start-ups.
C)  are less likely to exist in service industries than in manufacturing industries.
D)  are engaged mainly in basic scientific research.E) A) and D)
F) C) and D)

Question 12

Entrepreneurs often form new small firms called "spin-off firms."

Accepted Answer

A) True 
 B)False

Question 13

As pizza topped with barbecue chicken became popular at specialty restaurants, Pizza Hut and Papa John's introduced a similar pizza.This imitation illustrates

Accepted Answer

A)  innovation.
B)  invention.
C)  creative destruction.
D)  diffusion.E) All of the above
F) B) and C)

Question 14

As it relates to R&D, the expected-rate-of-return curve, r,

Accepted Answer

A)  usually slopes upward.
B)  shows the cost of financing various levels of R&D.
C)  varies in location depending on the location of the interest-rate cost-of-funds curve, i.
D)  represents the marginal benefit element in the MB = MC decision framework.E) B) and D)
F) A) and D)

Question 15

If an R&D activity is affordable, the firm should spend on that activity.

Accepted Answer

A) True 
 B)False

Question 16

A firm should increase the amount of R&D expenditures to

Accepted Answer

A)  the maximum amount of funding that is available to the firm.
B)  the point where the expected return equals the cost of funds.
C)  a critical minimum level so that the firm can remain competitive.
D)  a point where the difference between the expected return and the cost of funds is at a maximum.E) All of the above
F) B) and C)

Question 17

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Accepted Answer

A) True 
 B)False

Question 18

Product innovation will be successful only if it makes the product's

Accepted Answer

A)  marginal utility increase.
B)  price decrease.
C)  marginal-utility-to-price ratio increase.
D)  marginal-utility-to-price ratio decrease.E) None of the above
F) B) and C)

Question 19

The following can increase the profits of an innovating firm, except

Accepted Answer

A)  new product introductions.
B)  existing product improvements.
C)  imitation of its innovation by other firms.
D)  successful process innovations.E) None of the above
F) A) and B)

Question 20

When entrepreneurs use their own personal savings to finance the R&D for their new venture, the marginal cost of financing is zero.

Accepted Answer

A) True 
 B)False

Exam 15: Technology, Rd, and Efficiency

Large, well-established firms are more likely to use retained earnings to finance R&D, while small start-up firms are more likely to rely on venture capital.

Correct Answer
verified

The conjecture that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall as industry concentration rises is known as the

Correct Answer
verified

A firm should increase the amount of R&D expenditures to

Correct Answer
verified

Correct Answer
verified

About percent of business R&D spending is for basic research.

Correct Answer
verified

The expected-rate-of-return curve for R&D expenditures of a firm slopes downward because of

Correct Answer
verified

Product innovation will be successful only if it makes the product's

Correct Answer
verified

Technological advance is a three-step process of

Correct Answer
verified

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

Correct Answer
verified

As it relates to R&D, the expected-rate-of-return curve, r,

Correct Answer
verified

If an R&D activity is affordable, the firm should spend on that activity.

Correct Answer
verified

When entrepreneurs use their own personal savings to finance the R&D for their new venture, the marginal cost of financing is zero.

Correct Answer
verified

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Correct Answer
verified

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

Correct Answer
verified

Inventions and innovations can both be patented.

Correct Answer
verified

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later.The firm will

Correct Answer
verified

The following can increase the profits of an innovating firm, except

Correct Answer
verified

Entrepreneurs

Correct Answer
verified

As pizza topped with barbecue chicken became popular at specialty restaurants, Pizza Hut and Papa John's introduced a similar pizza.This imitation illustrates

Correct Answer
verified

Entrepreneurs often form new small firms called "spin-off firms."

Correct Answer
verified

Exam 15: Technology, Rd, and Efficiency

Large, well-established firms are more likely to use retained earnings to finance R&D, while small start-up firms are more likely to rely on venture capital.

Correct AnswerverifiedShow Answer

The conjecture that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall as industry concentration rises is known as the

Correct AnswerverifiedShow Answer

A firm should increase the amount of R&D expenditures to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

About percent of business R&D spending is for basic research.

Correct AnswerverifiedShow Answer

The expected-rate-of-return curve for R&D expenditures of a firm slopes downward because of

Correct AnswerverifiedShow Answer

Product innovation will be successful only if it makes the product's

Correct AnswerverifiedShow Answer

Technological advance is a three-step process of

Correct AnswerverifiedShow Answer

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

Correct AnswerverifiedShow Answer

As it relates to R&D, the expected-rate-of-return curve, r,

Correct AnswerverifiedShow Answer

If an R&D activity is affordable, the firm should spend on that activity.

Correct AnswerverifiedShow Answer

When entrepreneurs use their own personal savings to finance the R&D for their new venture, the marginal cost of financing is zero.

Correct AnswerverifiedShow Answer

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Correct AnswerverifiedShow Answer

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

Correct AnswerverifiedShow Answer

Inventions and innovations can both be patented.

Correct AnswerverifiedShow Answer

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later.The firm will

Correct AnswerverifiedShow Answer

The following can increase the profits of an innovating firm, except

Correct AnswerverifiedShow Answer

Entrepreneurs

Correct AnswerverifiedShow Answer

As pizza topped with barbecue chicken became popular at specialty restaurants, Pizza Hut and Papa John's introduced a similar pizza.This imitation illustrates

Correct AnswerverifiedShow Answer

Entrepreneurs often form new small firms called "spin-off firms."

Correct AnswerverifiedShow Answer

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