Question 1

Assume a firm faces these costs: total cost of capital = $4,000; price paid for labor = $20 per labor unit; and price paid for raw materials = $8 per raw-material unit. If the firm can produce 2,000 units of output by combining its fixed capital with 200 units of labor and 500 units of raw materials, what are the total cost (TC) and average total cost (ATC) of producing the 2,000 units of output?

Accepted Answer

A)  TC = $4,000; ATC = $4.00
B)  TC = $8,000; ATC = $5.00
C)  TC = $12,000; ATC = $6.00
D)  TC = $15,000; ATC = $8.00E) A) and B)
F) All of the above

Question 2

Firm ABC designs and implements a lower-cost method of producing its product. This is an example of

Accepted Answer

A)  product innovation.
B)  the inverted U-theory.
C)  economies of scale.
D)  process innovation.E) B) and C)
F) All of the above

Question 3

How does technological advance enhance economic efficiency? Distinguish between its effects on productive efficiency and allocative efficiency.

Accepted Answer

Technological advance contributes signif...

Question 4

Funds lent to start-up firms in return for shares of the profit if the firms succeed are called

Accepted Answer

A)  retained earnings.
B)  time deposits.
C)  venture capital.
D)  transfer payments.E) B) and D)
F) None of the above

Question 5

R&D activities by government and universities have not been an important factor in fostering technological advance.

Accepted Answer

A) True 
 B)False

Question 6

Imitation by rivals is one factor that hinders the diffusion of technological advances.

Accepted Answer

A) True 
 B)False

Question 7

Suppose a firm anticipates that a particular R&D expenditure of $100 million will result in a new product and thus create a one-time added profit of $108 million a year later. The firm will

Accepted Answer

A)  undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent.
B)  undertake the R&D expenditure if its interest-rate cost of borrowing is 10 percent.
C)  not undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent.
D)  not undertake the R&D expenditure if its interest-rate cost of borrowing is 7 percent.E) B) and D)
F) A) and B)

Question 8

Technological advance consists of short-run adjustments to the production process that reduce costs.

Accepted Answer

A) True 
 B)False

Question 9

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) None of the above
F) A) and C)

Question 10

Refer to the data. The firm's optimal amount of R&D spending is

Accepted Answer

A)  $40 million.
B)  $60 million.
C)  $80 million.
D)  $20 million.E) B) and C)
F) A) and D)

Question 11

In the United States, research and development spending as a percentage of GDP is

Accepted Answer

A)  1.5 to 2.0 percent, which is lower than many other industrial countries.
B)  2.5 to 3.0 percent, which is higher than many other industrial countries.
C)  4.5 to 5.0 percent, which is lower than many other industrial countries.
D)  5.5 to 6.0 percent, which is higher than many other industrial countries.E) B) and D)
F) B) and C)

Question 12

Broadly defined, technological advance

Accepted Answer

A)  can occur in the short run, long run, or very long run.
B)  comprises new and improved goods and services and/or new and improved ways of producing or distributing them.
C)  includes invention but not innovation or diffusion.
D)  includes product innovation but not process innovation.E) None of the above
F) C) and D)

Question 13

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

Question 14

U.S. business firms channel a majority of their R&D expenditures to scientific research.

Accepted Answer

A) True 
 B)False

Question 15

We know with certainty that a consumer will buy a newly introduced product rather than an existing product when the

Accepted Answer

A)  MU/ P of the new product exceeds the MU/ P of the existing product.
B)  price of the new product is less than the price of the existing product.
C)  MU of the new product is more than the MU of the existing product.
D)  law of diminishing marginal utility applies to the existing product.E) A) and B)
F) A) and C)

Question 16

Under which market structure are profit rewards most likely to be quickly taken away by existing firms or new firms entering the industry?

Accepted Answer

A)  oligopoly
B)  pure monopoly
C)  pure competition
D)  monopolistic competitionE) C) and D)
F) B) and D)

Question 17

The traditional view of technological advance was that it

Accepted Answer

A)  was a random external force to which the economy adjusted.
B)  arose largely from advances in military-related research.
C)  was the result of capitalism and the rivalry among firms.
D)  arose from international trade and the sharing of ideas among nations.E) C) and D)
F) B) and C)

Question 18

The table shows the expected rate of return, R&D spending, and interest-rate cost-of-funds for a hypothetical firm. In a graph for determining the optimal R&D expenditure, the interest-cost of funds curve would be a(n)

Accepted Answer

A)  upsloping line within the range $35M to $75M.
B)  horizontal line at 24 percent.
C)  upsloping line within the range 8 to 24 percent.
D)  downsloping line within the range 24 to 8 percent.E) All of the above
F) A) and B)

Question 19

The technical and scientific characteristics of an industry may be less important than its structure in determining R&D spending and innovation.

Accepted Answer

A) True 
 B)False

Question 20

A firm's marginal benefit from its R&D expenditures is the

Accepted Answer

A)  total amount spent on its R&D activities.
B)  expected profit from the last dollar spent on R&D.
C)  employment generated by the largest R&D project.
D)  resources bought for all of its R&D activities.E) C) and D)
F) B) and D)

Exam 15: Technology, RD, and Efficiency

Under which market structure are profit rewards most likely to be quickly taken away by existing firms or new firms entering the industry?

Correct Answer
verified

A firm's marginal benefit from its R&D expenditures is the

Correct Answer
verified

Firm ABC designs and implements a lower-cost method of producing its product. This is an example of

Correct Answer
verified

U.S. business firms channel a majority of their R&D expenditures to scientific research.

Correct Answer
verified

We know with certainty that a consumer will buy a newly introduced product rather than an existing product when the

Correct Answer
verified

Other things equal, the prospect of imitation by others

Correct Answer
verified

Correct Answer
verified

Broadly defined, technological advance

Correct Answer
verified

Funds lent to start-up firms in return for shares of the profit if the firms succeed are called

Correct Answer
verified

R&D activities by government and universities have not been an important factor in fostering technological advance.

Correct Answer
verified

Imitation by rivals is one factor that hinders the diffusion of technological advances.

Correct Answer
verified

In the United States, research and development spending as a percentage of GDP is

Correct Answer
verified

The traditional view of technological advance was that it

Correct Answer
verified

Refer to the data. The firm's optimal amount of R&D spending is

Correct Answer
verified

The table shows the expected rate of return, R&D spending, and interest-rate cost-of-funds for a hypothetical firm. In a graph for determining the optimal R&D expenditure, the interest-cost of funds curve would be a(n)

Correct Answer
verified

Suppose a firm anticipates that a particular R&D expenditure of $100 million will result in a new product and thus create a one-time added profit of $108 million a year later. The firm will

Correct Answer
verified

Technological advance consists of short-run adjustments to the production process that reduce costs.

Correct Answer
verified

How does technological advance enhance economic efficiency? Distinguish between its effects on productive efficiency and allocative efficiency.

Correct Answer
verified
Technological advance contributes signif...
View 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 Answer
verified

The technical and scientific characteristics of an industry may be less important than its structure in determining R&D spending and innovation.

Correct Answer
verified

Exam 15: Technology, RD, and Efficiency

Under which market structure are profit rewards most likely to be quickly taken away by existing firms or new firms entering the industry?

Correct AnswerverifiedShow Answer

A firm's marginal benefit from its R&D expenditures is the

Correct AnswerverifiedShow Answer

Firm ABC designs and implements a lower-cost method of producing its product. This is an example of

Correct AnswerverifiedShow Answer

U.S. business firms channel a majority of their R&D expenditures to scientific research.

Correct AnswerverifiedShow Answer

We know with certainty that a consumer will buy a newly introduced product rather than an existing product when the

Correct AnswerverifiedShow Answer

Other things equal, the prospect of imitation by others

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Broadly defined, technological advance

Correct AnswerverifiedShow Answer

Funds lent to start-up firms in return for shares of the profit if the firms succeed are called

Correct AnswerverifiedShow Answer

R&D activities by government and universities have not been an important factor in fostering technological advance.

Correct AnswerverifiedShow Answer

Imitation by rivals is one factor that hinders the diffusion of technological advances.

Correct AnswerverifiedShow Answer

In the United States, research and development spending as a percentage of GDP is

Correct AnswerverifiedShow Answer

The traditional view of technological advance was that it

Correct AnswerverifiedShow Answer

Refer to the data. The firm's optimal amount of R&D spending is

Correct AnswerverifiedShow Answer

The table shows the expected rate of return, R&D spending, and interest-rate cost-of-funds for a hypothetical firm. In a graph for determining the optimal R&D expenditure, the interest-cost of funds curve would be a(n)

Correct AnswerverifiedShow Answer

Suppose a firm anticipates that a particular R&D expenditure of $100 million will result in a new product and thus create a one-time added profit of $108 million a year later. The firm will

Correct AnswerverifiedShow Answer

Technological advance consists of short-run adjustments to the production process that reduce costs.

Correct AnswerverifiedShow Answer

How does technological advance enhance economic efficiency? Distinguish between its effects on productive efficiency and allocative efficiency.

Correct AnswerverifiedTechnological advance contributes signif...View AnswerShow 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

The technical and scientific characteristics of an industry may be less important than its structure in determining R&D spending and innovation.

Correct AnswerverifiedShow Answer

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Technological advance contributes signif...
View Answer

Correct Answer
verified

Correct Answer
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