Question 1

Many economists view technological advance as mainly a response to profit opportunities arising within a capitalist economy, and not some random external force.

Accepted Answer

A) True 
 B)False

Question 2

Suppose a firm anticipates that an R&D expenditure of $100 million will result in a new production process that will reduce costs and thus create a one-time added profit of $112 million a year later.The firm's expected rate of return is

Accepted Answer

A)  0.12 percent.
B)  112 percent.
C)  12 percent.
D)  2 percent.E) A) and B)
F) A) and D)

Question 3

Creative destruction is

Accepted Answer

A)  the process by which large firms buy up small firms.
B)  the process by which new firms and new products replace existing dominant firms and products.
C)  a term coined many years ago by Adam Smith.
D)  applicable to planned economies but not to market economies.E) A) and D)
F) A) and C)

Question 4

A consumer will buy a new product rather than an existing product

Accepted Answer

A)  when the MU/P of the new product is less than the MU/P of the existing product.
B)  when the substitution of the new product for the old product increases the consumer's total utility.
C)  only if the new product has a lower price than the existing product.
D)  only if the MU of the new product exceeds the MU of the existing product.E) A) and D)
F) B) and C)

Question 5

In the inverted-U theory of R&D, which of the following industry concentration ratios would be most conducive to R&D (as a percentage of firm sales) ?

Accepted Answer

A)  1 percent
B)  10 percent
C)  50 percent
D)  70 percentE) A) and B)
F) None of the above

Question 6

"Intrapreneurs" is the term sometimes used to refer to

Accepted Answer

A)  entrepreneurs who are initiators and risk bearers.
B)  business people who pool their financial resources to pursue a business idea.
C)  individuals who work as their own bosses.
D)  salaried employees engaged in R&D activities in existing companies.E) B) and C)
F) None of the above

Question 7

The modern view of technological advance is that it

Accepted Answer

A)  is the result of random lucky events unrelated to the economic system.
B)  requires government R&D spending to keep it going.
C)  arises from intense rivalry among individuals and firms within the capitalist system.
D)  is a force that is external to the economy, to which the economy adjusts.E) A) and B)
F) A) and C)

Question 8

The marginal cost-of-funds curve for a firm shows the

Accepted Answer

A)  interest rate that a firm must pay for additional funding.
B)  rate of return that a firm gets from its investment projects.
C)  amount of funds available to a firm for its investments.
D)  sources of funds that a firm has for its various projects.E) A) and B)
F) B) and D)

Question 9

The first discovery of the water-soluble material used in contact lenses is an example of

Accepted Answer

A)  innovation.
B)  invention.
C)  creative destruction.
D)  diffusion.E) A) and B)
F) C) and D)

Question 10

The optimal amount of R&D for a firm depends on the following, except

Accepted Answer

A)  marginal cost of funds for R&D projects.
B)  marginal benefit of R&D projects.
C)  expected profitability of R&D projects.
D)  amount of funds the firm currently has for R&D projects.E) A) and B)
F) B) and C)

Question 11

Which of the following would be the best example of a "start-up"?

Accepted Answer

A)  the formation of Imation by the 3Com Corporation
B)  the founding of Apple by Jobs and Wozniak
C)  the buyout of McCaw Communications by AT&T
D)  the sale of a license by IBM to Dell computersE) B) and D)
F) B) and C)

Question 12

Fast-second strategies are more likely to be used by

Accepted Answer

A)  dominant firms than by start-up firms.
B)  pure competitors rather than by oligopolists.
C)  start-up firms rather than by existing firms.
D)  entrepreneurs rather than by corporations.E) A) and B)
F) B) and C)

Question 13

The discovery of a product or process through the use of imagination, ingenious thinking, and experimentation is

Accepted Answer

A)  process innovation.
B)  product innovation.
C)  invention.
D)  imitation.E) A) and B)
F) A) and C)

Question 14

Process innovation will shift a firm's

Accepted Answer

A)  total product curve upward.
B)  total product curve downward.
C)  marginal product curve downward.
D)  marginal cost curve upwarD.E) A) and B)
F) A) and D)

Question 15

Product innovation contributes to technological advance primarily by

Accepted Answer

A)  decreasing allocative efficiency.
B)  increasing allocative efficiency.
C)  decreasing productive efficiency.
D)  increasing productive efficiency.E) A) and B)
F) B) and C)

Question 16

A firm's optimal amount of R&D occurs where the marginal benefit of this activity exceeds marginal cost by the greatest amount.

Accepted Answer

A) True 
 B)False

Question 17

The retained earnings that corporations often use to finance R&D are also known as

Accepted Answer

A)  venture capital.
B)  undistributed profits.
C)  dividends.
D)  mutual funds.E) All of the above
F) B) and C)

Question 18

Joseph Schumpeter viewed capitalism as a process of "creative destruction" because

Accepted Answer

A)  profitable firms are bought out by larger firms.
B)  capitalism would create wealth, but government would destroy it.
C)  the creation of new products would destroy the market for existing products.
D)  invention is a creative process, but most ideas are destroyed when entrepreneurs develop and market products.E) B) and C)
F) All of the above

Question 19

Other things equal, the prospect of imitation by others

Accepted Answer

A)  decreases the expected rate of return on R&D expenditures.
B)  increases the expected rate of return on R&D expenditures.
C)  increases the interest-rate cost of funds used to finance R&D expenditures.
D)  decreases the interest-rate cost of funds used to finance R&D expenditures.E) All of the above
F) B) and C)

Question 20

The legal protection for publishers of books, computer software, movies, videos, and musical compositions from having their works used or copied by others without their permission is a

Accepted Answer

A)  patent.
B)  copyright.
C)  brand name.
D)  trademark.E) B) and C)
F) A) and D)

Exam 15: Technology, Rd, and Efficiency

The modern view of technological advance is that it

Correct AnswerverifiedShow Answer

Suppose a firm anticipates that an R&D expenditure of $100 million will result in a new production process that will reduce costs and thus create a one-time added profit of $112 million a year later.The firm's expected rate of return is

Correct AnswerverifiedShow Answer

The legal protection for publishers of books, computer software, movies, videos, and musical compositions from having their works used or copied by others without their permission is a

Correct AnswerverifiedShow Answer

Fast-second strategies are more likely to be used by

Correct AnswerverifiedShow Answer

In the inverted-U theory of R&D, which of the following industry concentration ratios would be most conducive to R&D (as a percentage of firm sales) ?

Correct AnswerverifiedShow Answer

A firm's optimal amount of R&D occurs where the marginal benefit of this activity exceeds marginal cost by the greatest amount.

Correct AnswerverifiedShow Answer

Creative destruction is

Correct AnswerverifiedShow Answer

The optimal amount of R&D for a firm depends on the following, except

Correct AnswerverifiedShow Answer

Many economists view technological advance as mainly a response to profit opportunities arising within a capitalist economy, and not some random external force.

Correct AnswerverifiedShow Answer

Product innovation contributes to technological advance primarily by

Correct AnswerverifiedShow Answer

The discovery of a product or process through the use of imagination, ingenious thinking, and experimentation is

Correct AnswerverifiedShow Answer

Other things equal, the prospect of imitation by others

Correct AnswerverifiedShow Answer

The marginal cost-of-funds curve for a firm shows the

Correct AnswerverifiedShow Answer

The retained earnings that corporations often use to finance R&D are also known as

Correct AnswerverifiedShow Answer

"Intrapreneurs" is the term sometimes used to refer to

Correct AnswerverifiedShow Answer

Process innovation will shift a firm's

Correct AnswerverifiedShow Answer

Joseph Schumpeter viewed capitalism as a process of "creative destruction" because

Correct AnswerverifiedShow Answer

A consumer will buy a new product rather than an existing product

Correct AnswerverifiedShow Answer

The first discovery of the water-soluble material used in contact lenses is an example of

Correct AnswerverifiedShow Answer

Which of the following would be the best example of a "start-up"?

Correct AnswerverifiedShow Answer

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