Question 1

Suppose that a firm's legal staff concludes that a new production process that the firm is developing is patentable. Graphically, this new information would shift the firm's expected-rate-of-return curve on R&D to the

Accepted Answer

A)  right and reduce its optimal amount of R&D.
B)  right and increase its optimal amount of R&D.
C)  left and increase its optimal amount of R&D.
D)  left and reduce its optimal amount of R&D.E) B) and C)
F) A) and B)

Question 2

Refer to the data for a consumer whose income = $12. Assume new product Z is introduced. How many units of Z will this consumer buy, given his or her $12 budget?

Accepted Answer

A)  6 units
B)  4 units
C)  2 units
D)  0 unitsE) All of the above
F) A) and C)

Question 3

Invention and innovation are not the same; innovation tends be derived from invention.

Accepted Answer

A) True 
 B)False

Question 4

A firm decides to make a $40 million expenditure on research and development that will create a new product. This product is expected to generate a one-time increase in the firm's revenues by a total of $150 million a year later. The firm also estimates that the production cost of the new product will be $107 million, also realized one year after the initial R&D expenditure. What is the expected rate of return on this research and development expenditure?

Accepted Answer

A)  12.5 percent
B)  9.3 percent
C)  7.5 percent
D)  28.7 percentE) None of the above
F) B) and D)

Question 5

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) A) and C)

Question 6

Process innovation is represented as a downward shift in a firm's total product curve and its average total cost curve.

Accepted Answer

A) True 
 B)False

Question 7

The first commercial introduction of transparent tape is an example of

Accepted Answer

A)  innovation.
B)  invention.
C)  creative destruction.
D)  diffusion.E) None of the above
F) A) and C)

Question 8

A "fast-second strategy" means that a dominant firm in an industry

Accepted Answer

A)  uses just-in-time inventory control methods to speed production.
B)  cuts the development time for the introduction of a new product.
C)  lets smaller firms initiate new products and then quickly imitates the success.
D)  merges with the second largest firm in the industry to gain a larger market share.E) A) and B)
F) All of the above

Question 9

Kara's Kettles, Inc. has developed a new and improved type of cookware. Alex, a typical consumer, will necessarily purchase Kara's new product if his MU/ P for the new cookware exceeds that of competing products.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Technological advance may lead to new monopolies and may also destroy existing monopolies.

Accepted Answer

A) True 
 B)False

Question 12

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 MU ₐ /P ₐ = 40 and MU ᵦ /P ᵦ = 45. To maximize utility without spending more money, the consumer should

Accepted Answer

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

Question 13

Technological advance improves productive efficiency by

Accepted Answer

A)  lowering average total cost.
B)  increasing marginal utility.
C)  enhancing monopoly power.
D)  giving society a more-preferred mix of goods and services.E) B) and C)
F) A) and C)

Question 14

The inverted-U theory suggests that R&D effort is strongest in very high concentration industries.

Accepted Answer

A) True 
 B)False

Question 15

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) A) and C)
F) A) and B)

Question 16

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

Question 17

A legal protection for taking the lead in innovation is

Accepted Answer

A)  brand names.
B)  trade secrets.
C)  copyright.
D)  mergers.E) C) and D)
F) All of the above

Question 18

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) B) and C)
F) A) and C)

Question 19

In choosing between an old reliable product and a new attractive product, the consumer will

Accepted Answer

A)  always buy the product with the lower price.
B)  always buy the product with the higher MU.
C)  buy the one with the higher MU-to-P ratio.
D)  buy the one with the lower MU-to-P ratio.E) B) and C)
F) A) and B)

Question 20

Creative destruction may either increase or reduce competition, depending on whether the innovation is done by start-up firms or existing dominant firms.

Accepted Answer

A) True 
 B)False

Exam 15: Technology, RD, and Efficiency

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

Correct Answer
verified

The first commercial introduction of transparent tape is an example of

Correct Answer
verified

A "fast-second strategy" means that a dominant firm in an industry

Correct Answer
verified

In choosing between an old reliable product and a new attractive product, the consumer will

Correct Answer
verified

Technological advance may lead to new monopolies and may also destroy existing monopolies.

Correct Answer
verified

Creative destruction may either increase or reduce competition, depending on whether the innovation is done by start-up firms or existing dominant firms.

Correct Answer
verified

The inverted-U theory suggests that R&D effort is strongest in very high concentration industries.

Correct Answer
verified

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

Correct Answer
verified

Process innovation is represented as a downward shift in a firm's total product curve and its average total cost curve.

Correct Answer
verified

Fast-second strategies are more likely to be used by

Correct Answer
verified

Suppose that a firm's legal staff concludes that a new production process that the firm is developing is patentable. Graphically, this new information would shift the firm's expected-rate-of-return curve on R&D to the

Correct Answer
verified

Technological advance improves productive efficiency by

Correct Answer
verified

Invention and innovation are not the same; innovation tends be derived from invention.

Correct Answer
verified

Refer to the data for a consumer whose income = $12. Assume new product Z is introduced. How many units of Z will this consumer buy, given his or her $12 budget?

Correct Answer
verified

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

Correct Answer
verified

A legal protection for taking the lead in innovation is

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

Kara's Kettles, Inc. has developed a new and improved type of cookware. Alex, a typical consumer, will necessarily purchase Kara's new product if his MU/ P for the new cookware exceeds that of competing products.

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 MU ₐ /P ₐ = 40 and MU ᵦ /P ᵦ = 45. To maximize utility without spending more money, the consumer should

Correct Answer
verified

Correct Answer
verified

Exam 15: Technology, RD, and Efficiency

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

The first commercial introduction of transparent tape is an example of

Correct AnswerverifiedShow Answer

A "fast-second strategy" means that a dominant firm in an industry

Correct AnswerverifiedShow Answer

In choosing between an old reliable product and a new attractive product, the consumer will

Correct AnswerverifiedShow Answer

Technological advance may lead to new monopolies and may also destroy existing monopolies.

Correct AnswerverifiedShow Answer

Creative destruction may either increase or reduce competition, depending on whether the innovation is done by start-up firms or existing dominant firms.

Correct AnswerverifiedShow Answer

The inverted-U theory suggests that R&D effort is strongest in very high concentration industries.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Process innovation is represented as a downward shift in a firm's total product curve and its average total cost curve.

Correct AnswerverifiedShow Answer

Fast-second strategies are more likely to be used by

Correct AnswerverifiedShow Answer

Suppose that a firm's legal staff concludes that a new production process that the firm is developing is patentable. Graphically, this new information would shift the firm's expected-rate-of-return curve on R&D to the

Correct AnswerverifiedShow Answer

Technological advance improves productive efficiency by

Correct AnswerverifiedShow Answer

Invention and innovation are not the same; innovation tends be derived from invention.

Correct AnswerverifiedShow Answer

Refer to the data for a consumer whose income = $12. Assume new product Z is introduced. How many units of Z will this consumer buy, given his or her $12 budget?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A legal protection for taking the lead in innovation is

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

Kara's Kettles, Inc. has developed a new and improved type of cookware. Alex, a typical consumer, will necessarily purchase Kara's new product if his MU/ P for the new cookware exceeds that of competing products.

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 MU ₐ /P ₐ = 40 and MU ᵦ /P ᵦ = 45. To maximize utility without spending more money, the consumer should

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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