Question 1

Entrepreneurs

Accepted Answer

A)   include everyone engaged in R&D work.
B)   are located in small enterprises only.
C)   differ from other innovators because of the risks entrepreneurs must bear.
D)   work exclusively in government and university R&D laboratories.E) B) and D)
F) A) and C)

Question 2

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

Question 3

One of the advantages of being first to develop a new product is the opportunity to develop brand-name recognition.

Accepted Answer

A) True 
 B)False

Question 4

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

Accepted Answer

A)   number of firms in the industry.
B)   length of time for government patents.
C)   scientific character of the industry.
D)   imitation problem in the industry.E) None of the above
F) A) and B)

Question 5

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. Originally the firm produced 2,000 units of output by combining its fixed capital with 200 units of labor and 500 units of raw materials. Now the firm improves its production process so that it can produce 3,000 units of output by combining its fixed capital with 100 units of labor and 500 units of raw materials. What happened to total cost?

Accepted Answer

A)   TC increased by $2,000
B)   TC decreased by $2,000
C)   TC decreased by $4,000
D)   TC remained unchangedE) A) and B)
F) A) and D)

Question 6

As it relates to R&D, the imitation problem is that

Accepted Answer

A)   patents, copyrights, and trademarks hinder imitation and thus limit economically desirable diffusion.
B)   brand names create entry barriers for would-be competitors.
C)   diffusion of innovation occurs more slowly than is desirable from society's perspective.
D)   a firm's rivals may be able to copy its new product or process innovation, reducing the original firm's return on R&D.E) A) and B)
F) A) and C)

Question 7

Process innovation refers to

Accepted Answer

A)   development of new products.
B)   implementation of better methods of producing products.
C)   first discovery of new scientific principles.
D)   widespread imitation of innovations.E) B) and C)
F) B) and D)

Question 8

The wide imitation and spread of an innovation is called

Accepted Answer

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

Question 9

R&D spending decisions are complicated because

Accepted Answer

A)   costs of R&D are immediate, while benefits occur at some future time and are uncertain.
B)   benefits of R&D are clear, but costs are complicated and hard to estimate.
C)   there are so many different sources of funds for R&D, and they each require different returns.
D)   it is difficult to determine which R&D activities could be patented.E) A) and B)
F) All of the above

Question 10

The spread of innovation through imitation refers to

Accepted Answer

A)   invention.
B)   diffusion.
C)   duplication.
D)   diversification.E) A) and B)
F) A) and C)

Question 11

Entrepreneurs often form new small firms called "spin-off firms."

Accepted Answer

A) True 
 B)False

Question 12

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 13

If a particular R&D expenditure is expected to be worthwhile, the firm should undertake it because the project will definitely increase the firm's future profits.

Accepted Answer

A) True 
 B)False

Question 14

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) None of the above
F) All of the above

Question 15

Firms have several sources of funds to finance their R&D activities, including the following, except

Accepted Answer

A)   loans obtained from banks and bondholders.
B)   retained earnings or corporate savings.
C)   venture capital and personal savings.
D)   anticipated profits from forthcoming new products.E) A) and D)
F) C) and D)

Question 16

The first discovery (as distinct from first commercial application)  of a product or process is called

Accepted Answer

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

Question 17

Inventions and innovations can both be patented.

Accepted Answer

A) True 
 B)False

Question 18

Creative destruction is not automatic because

Accepted Answer

A)   there are major obstacles to the entry of new innovative firms into concentrated industries.
B)   consumer tastes are highly unstable.
C)   corporate takeovers increase dynamic competition.
D)   large firms rarely are technologically progressive.E) None of the above
F) A) and D)

Question 19

Suppose that a firm successfully introduces a highly profitable new product. If this new product offers less marginal utility per unit to consumers than existing substitute products, then the

Accepted Answer

A)   laws of economics have been violated.
B)   new product must have increasing, not diminishing, marginal utility.
C)   existing products were being produced at a loss.
D)   new product has a lower price than the existing substitute products.E) None of the above
F) A) and C)

Question 20

The theory that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall with increases in industry concentration is called the inverted-U theory of R&D.

Accepted Answer

A) True 
 B)False

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

Entrepreneurs often form new small firms called "spin-off firms."

Correct Answer
verified

Suppose that a firm successfully introduces a highly profitable new product. If this new product offers less marginal utility per unit to consumers than existing substitute products, then the

Correct Answer
verified

If a particular R&D expenditure is expected to be worthwhile, the firm should undertake it because the project will definitely increase the firm's future profits.

Correct Answer
verified

The first discovery (as distinct from first commercial application) of a product or process is called

Correct Answer
verified

Inventions and innovations can both be patented.

Correct Answer
verified

The wide imitation and spread of an innovation is called

Correct Answer
verified

The spread of innovation through imitation refers to

Correct Answer
verified

The theory that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall with increases in industry concentration is called the inverted-U theory of R&D.

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Process innovation refers to

Correct Answer
verified

As it relates to R&D, the imitation problem is that

Correct Answer
verified

One of the advantages of being first to develop a new product is the opportunity to develop brand-name recognition.

Correct Answer
verified

Firms have several sources of funds to finance their R&D activities, including the following, except

Correct Answer
verified

Entrepreneurs

Correct Answer
verified

R&D spending decisions are complicated because

Correct Answer
verified

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

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

Creative destruction is not automatic because

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

Entrepreneurs often form new small firms called "spin-off firms."

Correct AnswerverifiedShow Answer

Suppose that a firm successfully introduces a highly profitable new product. If this new product offers less marginal utility per unit to consumers than existing substitute products, then the

Correct AnswerverifiedShow Answer

If a particular R&D expenditure is expected to be worthwhile, the firm should undertake it because the project will definitely increase the firm's future profits.

Correct AnswerverifiedShow Answer

The first discovery (as distinct from first commercial application) of a product or process is called

Correct AnswerverifiedShow Answer

Inventions and innovations can both be patented.

Correct AnswerverifiedShow Answer

The wide imitation and spread of an innovation is called

Correct AnswerverifiedShow Answer

The spread of innovation through imitation refers to

Correct AnswerverifiedShow Answer

The theory that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall with increases in industry concentration is called the inverted-U theory of R&D.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Process innovation refers to

Correct AnswerverifiedShow Answer

As it relates to R&D, the imitation problem is that

Correct AnswerverifiedShow Answer

One of the advantages of being first to develop a new product is the opportunity to develop brand-name recognition.

Correct AnswerverifiedShow Answer

Firms have several sources of funds to finance their R&D activities, including the following, except

Correct AnswerverifiedShow Answer

Entrepreneurs

Correct AnswerverifiedShow Answer

R&D spending decisions are complicated because

Correct AnswerverifiedShow Answer

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

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

Creative destruction is not automatic because

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified