Question 1

One of the major advantages of being the first to develop a product is

Accepted Answer

A)   an increase in the average total cost of production.
B)   less need for legal protection for the product.
C)   the opportunity to be bought out for a profit.
D)   the ability to use the fast-second strategy.E) A) and B)
F) A) and C)

Question 2

The first commercial introduction of transparent tape is an example of

Accepted Answer

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

Question 3

Consumer acceptance of a new product depends on

Accepted Answer

A)   price alone.
B)   marginal utility alone.
C)   price and marginal utility.
D)   total utility divided by marginal utility.E) A) and D)
F) C) and D)

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

Suppose that a firm's legal staff concludes that a new product 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) A) and B)
F) B) and C)

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Technological advance increases productive efficiency by giving society a more preferred mix of goods.

Accepted Answer

A) True 
 B)False

Question 8

A profit-maximizing firm should not undertake an R&D project for which the

Accepted Answer

A)   expected rate of return exceeds its interest-rate cost of funds.
B)   interest-rate cost of funds exceeds the expected rate of return.
C)   expected returns are in the distant future.
D)   expected returns, though potentially very large, are uncertain.E) A) and B)
F) B) and C)

Question 9

Economists who contend that oligopolists have a strong incentive to engage in R&D say that

Accepted Answer

A)   the undistributed profits of oligopolists give them a source of readily available, relatively low-cost funds for financing R&D.
B)   entry barriers enable oligopolists to sustain the profit they gain from innovation.
C)   the large size of oligopolists' R&D departments allows them to use specialized, expensive R&D equipment and employ teams of specialized researchers.
D)   all of the other answers are true.E) A) and B)
F) A) and C)

Question 10

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

Question 11

The reason that innovation promotes competition is because

Accepted Answer

A)   innovative firms can charge any price they want for a new product.
B)   it lowers the research and development costs for innovative firms.
C)   firms use it to make competitors' products obsolete in the market.
D)   government provides patent protection for innovation that lasts for a long time.E) A) and B)
F) A) and C)

Question 12

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) C) and D)
F) B) and C)

Question 13

The first working prototype of a microcomputer chip would be an example of an

Accepted Answer

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

Question 14

Consumers will make a decision to purchase a new product only if it

Accepted Answer

A)   has a lower marginal utility per dollar spent than another product.
B)   is recommended as a valuable product by other consumers.
C)   increases the total utility they obtain from their limited income.
D)   can be sold at a lower price than that for a competing product.E) B) and C)
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

What is an example of a technological breakthrough that came out of a government or university laboratory?

Accepted Answer

A)   hybrid seeds
B)   Scotch tape
C)   Thinsulate insulation
D)   Post-it note padsE) C) and D)
F) B) and D)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

Which of the following does not aptly describe innovation?

Accepted Answer

A)   first commercial use of a new production process
B)   discovery of a new production method
C)   creation of a new form of business enterprise
D)   commercial introduction of a new productE) A) and B)
F) A) and D)

Question 19

Innovation is the first discovery of a new product or production process; invention is the first successful commercial introduction of the product or process.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 15: Technology, Rd, and Efficiency

Which of the following does not aptly describe innovation?

Correct AnswerverifiedShow Answer

Economists who contend that oligopolists have a strong incentive to engage in R&D say that

Correct AnswerverifiedShow Answer

Technological advance increases productive efficiency by giving society a more preferred mix of goods.

Correct AnswerverifiedShow Answer

The first working prototype of a microcomputer chip would be an example of an

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

Innovation is the first discovery of a new product or production process; invention is the first successful commercial introduction of the product or process.

Correct AnswerverifiedShow Answer

Consumers will make a decision to purchase a new product only if it

Correct AnswerverifiedShow Answer

The reason that innovation promotes competition is because

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Other things equal, the prospect of imitation by others

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 profit-maximizing firm should not undertake an R&D project for which the

Correct AnswerverifiedShow Answer

Suppose that a firm's legal staff concludes that a new product 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

Consumer acceptance of a new product depends on

Correct AnswerverifiedShow Answer

One of the major advantages of being the first to develop a product is

Correct AnswerverifiedShow Answer

The first commercial introduction of transparent tape is an example of

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is an example of a technological breakthrough that came out of a government or university laboratory?

Correct AnswerverifiedShow Answer

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