Question 1

Industry A has a 60 percent concentration ratio, while industry B has a 40 percent concentration ratio. According to the inverted-U theory, all else equal, we can conclude that

Accepted Answer

A)  industry A will be more technologically progressive than B.
B)  industry C, with a 10 percent concentration ratio, will be more technologically progressive than either industry A or B.
C)  industry D, with an 80 percent concentration ratio, will be more technologically progressive than either industry A or B.
D)  industry A and industry B should have similar amounts of R&D spending, all else equal.E) A) and B)
F) B) and C)

Question 2

Patent trolls

Accepted Answer

A)  enhance efficiency by shortening the effective life of a patent.
B)  harm firms' sales by posting negative product comments on social media.
C)  invent nothing and produce nothing, but collect royalties through patent ownership.
D)  are particularly problematic in the pharmaceutical industry.E) All of the above
F) A) and B)

Question 3

Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic. Which of the following would decrease a firm's optimal R&D expenditures and, in equilibrium, increase the expected rate of return on the last dollar of R&D?

Accepted Answer

A)  a rightward shift of the expected-rate-of-return curve
B)  an upward shift of the interest-rate cost-of-funds curve
C)  a leftward shift of the expected-rate-of-return curve
D)  a downward shift of the interest-rate cost-of-funds curveE) B) and C)
F) B) and D)

Question 4

Diffusion is the first successful commercial introduction of a product, the use of a new method, or the creation of a new form of business enterprise.

Accepted Answer

A) True 
 B)False

Question 5

The two types of innovation are product innovation and

Accepted Answer

A)  resource innovation.
B)  market innovation.
C)  process innovation.
D)  financial innovation.E) None of the above
F) A) and D)

Question 6

Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic. Which of the following would increase a firm's optimal R&D expenditures and, in equilibrium, leave the expected rate of return on the last dollar of R&D unchanged?

Accepted Answer

A)  a rightward shift of the expected-rate-of-return curve
B)  an upward shift of the interest-rate cost-of-funds curve
C)  a leftward shift of the expected-rate-of-return curve
D)  a downward shift of the interest-rate cost-of-funds curveE) A) and C)
F) All of the above

Question 7

In the graph, the expected-rate-of-return curve would be the line connecting points

Accepted Answer

A)  a, c, and e.
B)  b, c, and e.
C)  b, c, and d.
D)  a, c, and d.E) A) and B)
F) All of the above

Question 8

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) A) and D)
F) B) and D)

Question 9

Define invention. What does government do to protect it?

Accepted Answer

Invention is the conception of a new pro...

Question 10

In the graph, the difference between points d and e indicates that at $50M of R&D spending, the

Accepted Answer

A)  marginal cost is greater than the marginal benefit. Thus, R&D spending should be reduced.
B)  marginal cost is less than the marginal benefit. Thus. R&D spending should be reduced.
C)  marginal cost is greater than the marginal benefit. Thus, R&D spending should be increased.
D)  marginal cost is less than the marginal benefit. Thus, R&D spending should be increased.E) All of the above
F) None of the above

Question 11

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) None of the above

Question 12

Explain how the firm decides on the optimal amount of research and development.

Accepted Answer

A firm’s optimal level of R&D expenditur...

Question 13

Imitation by rivals tends to enhance the profits of the innovating firms.

Accepted Answer

A) True 
 B)False

Question 14

Assume that a consumer purchases a combination of products. Product A is an old and reliable product. Product B is a new and appealing product. The MUₐ /Pₐ = 15 and MUᵦ /Pᵦ = 10. To maximize utility without spending more money, the consumer should

Accepted Answer

A)  purchase less of B and more of A.
B)  purchase more of A and less of B.
C)  purchase more of both A and B.
D)  make no change in A and B.E) A) and B)
F) All of the above

Question 15

If we plotted the given data on a graph with R&D expenditures on the horizontal axis, the

Accepted Answer

A)  interest-rate cost-of-funds curve would be a vertical line.
B)  interest-rate cost-of-funds curve would slope downward.
C)  expected-rate-of-return curve would slope downward.
D)  expected-rate-of-return curve would be a horizontal line.E) None of the above
F) A) and C)

Question 16

The table shows the marginal utility schedules for old product X and new product Y for a hypothetical consumer. The price of X is $4, and the price of good Y is $3. The budget of the consumer is $18. When the consumer purchases the utility-maximizing combination of old product X and new product Y, total utility will be

Accepted Answer

A)  78.
B)  64.
C)  60.
D)  70.E) A) and D)
F) B) and C)

Question 17

Why do entrepreneurs and other innovators actively study the scientific output of universities and government laboratories?

Accepted Answer

Scientific principles cannot be patented...

Question 18

Creative destruction is the situation where the creation of new products destroys the monopoly market positions of firms producing existing products.

Accepted Answer

A) True 
 B)False

Question 19

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 8 percent. What is the optimal amount of R&D expenditures?

Accepted Answer

A)  $24 billion
B)  $30 billion
C)  $36 billion
D)  $42 billionE) None of the above
F) All of the above

Question 20

In the diagram, at $10 million of R&D expenditure, the

Accepted Answer

A)  expected rate of return exceeds the interest-rate cost of funds.
B)  firm is spending an optimal amount on R&D.
C)  interest-rate cost of funds exceeds the expected rate of return.
D)  marginal benefit of R&D is less than the marginal cost of R&D.E) A) and C)
F) C) and D)

Exam 15: Technology, RD, and Efficiency

The two types of innovation are product innovation and

Correct Answer
verified

Patent trolls

Correct Answer
verified

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

Correct Answer
verified

Industry A has a 60 percent concentration ratio, while industry B has a 40 percent concentration ratio. According to the inverted-U theory, all else equal, we can conclude that

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

Imitation by rivals tends to enhance the profits of the innovating firms.

Correct Answer
verified

In the graph, the difference between points d and e indicates that at $50M of R&D spending, the

Correct Answer
verified

Creative destruction is the situation where the creation of new products destroys the monopoly market positions of firms producing existing products.

Correct Answer
verified

Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic. Which of the following would increase a firm's optimal R&D expenditures and, in equilibrium, leave the expected rate of return on the last dollar of R&D unchanged?

Correct Answer
verified

In the diagram, at $10 million of R&D expenditure, the

Correct Answer
verified

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 8 percent. What is the optimal amount of R&D expenditures?

Correct Answer
verified

Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic. Which of the following would decrease a firm's optimal R&D expenditures and, in equilibrium, increase the expected rate of return on the last dollar of R&D?

Correct Answer
verified

Define invention. What does government do to protect it?

Correct Answer
verified
Invention is the conception of a new pro...
View Answer

If we plotted the given data on a graph with R&D expenditures on the horizontal axis, the

Correct Answer
verified

Correct Answer
verified

Diffusion is the first successful commercial introduction of a product, the use of a new method, or the creation of a new form of business enterprise.

Correct Answer
verified

Assume that a consumer purchases a combination of products. Product A is an old and reliable product. Product B is a new and appealing product. The MUₐ /Pₐ = 15 and MUᵦ /Pᵦ = 10. To maximize utility without spending more money, the consumer should

Correct Answer
verified

Explain how the firm decides on the optimal amount of research and development.

Correct Answer
verified
A firm’s optimal level of R&D expenditur...
View Answer

In the graph, the expected-rate-of-return curve would be the line connecting points

Correct Answer
verified

Why do entrepreneurs and other innovators actively study the scientific output of universities and government laboratories?

Correct Answer
verified
Scientific principles cannot be patented...
View Answer

Exam 15: Technology, RD, and Efficiency

The two types of innovation are product innovation and

Correct AnswerverifiedShow Answer

Patent trolls

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Industry A has a 60 percent concentration ratio, while industry B has a 40 percent concentration ratio. According to the inverted-U theory, all else equal, we can conclude that

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

Imitation by rivals tends to enhance the profits of the innovating firms.

Correct AnswerverifiedShow Answer

In the graph, the difference between points d and e indicates that at $50M of R&D spending, the

Correct AnswerverifiedShow Answer

Creative destruction is the situation where the creation of new products destroys the monopoly market positions of firms producing existing products.

Correct AnswerverifiedShow Answer

Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic. Which of the following would increase a firm's optimal R&D expenditures and, in equilibrium, leave the expected rate of return on the last dollar of R&D unchanged?

Correct AnswerverifiedShow Answer

In the diagram, at $10 million of R&D expenditure, the

Correct AnswerverifiedShow Answer

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 8 percent. What is the optimal amount of R&D expenditures?

Correct AnswerverifiedShow Answer

Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic. Which of the following would decrease a firm's optimal R&D expenditures and, in equilibrium, increase the expected rate of return on the last dollar of R&D?

Correct AnswerverifiedShow Answer

Define invention. What does government do to protect it?

Correct AnswerverifiedInvention is the conception of a new pro...View AnswerShow Answer

If we plotted the given data on a graph with R&D expenditures on the horizontal axis, the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Diffusion is the first successful commercial introduction of a product, the use of a new method, or the creation of a new form of business enterprise.

Correct AnswerverifiedShow Answer

Assume that a consumer purchases a combination of products. Product A is an old and reliable product. Product B is a new and appealing product. The MUₐ /Pₐ = 15 and MUᵦ /Pᵦ = 10. To maximize utility without spending more money, the consumer should

Correct AnswerverifiedShow Answer

Explain how the firm decides on the optimal amount of research and development.

Correct AnswerverifiedA firm’s optimal level of R&D expenditur...View AnswerShow Answer

In the graph, the expected-rate-of-return curve would be the line connecting points

Correct AnswerverifiedShow Answer

Why do entrepreneurs and other innovators actively study the scientific output of universities and government laboratories?

Correct AnswerverifiedScientific principles cannot be patented...View AnswerShow Answer

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Invention is the conception of a new pro...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A firm’s optimal level of R&D expenditur...
View Answer

Correct Answer
verified

Correct Answer
verified
Scientific principles cannot be patented...
View Answer