Question 1

Even where imitation is possible,a firm may gain advantage from being the first to introduce an innovative product because of:

Accepted Answer

A)   long-lasting brand-name recognition.
B)   a time lag between innovation and imitation by rivals.
C)   trade secrets that limit the ability of rivals to exactly imitate the product.
D)   all of these.E) A) and C)
F) C) and D)

Question 2

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)   the expected returns,though potentially very large,are uncertain.E) A) and B)
F) A) and C)

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 curve.E) A) and D)
F) B) and C) B

Question 4

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 that of most other industrial countries.
B)   2.5 to 3.0 percent,which is higher than that of most other industrial countries.
C)   4.5 to 5.0 percent,which is lower than that of most other industrial countries.
D)   5.5 to 6.0 percent,which is higher than that of most other industrial countries.E) B) and C)
F) None of the above

Question 5

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 it gains from innovation.
C)   the large size of oligopolists' R&D departments allows them to use very specialized,expensive R&D equipment and employ teams of specialized researchers.
D)   all of these are true.E) B) and C)
F) All of the above D

Question 6

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

Question 7

(Consider This) Violin strings made from sheep intestines were first called "catgut" because:

Accepted Answer

A)   at the time it was thought to be extremely unlucky to kill sheep.
B)   the inventor wanted to establish a legally protected brand name.
C)   the inventor wanted to preserve his trade secret.
D)   the inventor thought that "catgut" would sound less offensive to buyers than "sheep intestines."E) None of the above
F) A) and D)

Question 8

Successful new products enable consumers to increase the total utility they obtain from a specific amount of their total spending.

Accepted Answer

A) True 
 B)False

Question 9

Kodak introduced to the marketplace a digital camera that uses no film but that takes photos that can be shown on personal computers.This is an example of:

Accepted Answer

A)   economies of scale.
B)   product innovation.
C)   process innovation.
D)   venture capital.E) None of the above
F) B) and C)

Question 10

The major source of new scientific knowledge in the United States is:

Accepted Answer

A)   university and government research.
B)   R&D work in large corporations.
C)   entrepreneurs working alone.
D)   purely competitive and monopolistically competitive firms.E) None of the above
F) B) and D)

Question 11

Technological advance improves allocative efficiency by:

Accepted Answer

A)   enhancing monopoly power.
B)   reducing income inequality.
C)   giving society a more-preferred mix of goods and services.
D)   encouraging saving.E) None of the above
F) All of the above

Question 12

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

Question 13

In general,the:

Accepted Answer

A)   number of firms in the industry is far more important than the industry's scientific character and extent of technological opportunities.
B)   greater an industry's concentration ratio,the higher are its R&D expenditures in relation to sales.
C)   industry's scientific character and extent of technological opportunities often are more important than the industry's concentration ratio.
D)   higher the industry's interest cost of borrowing funds for R&D,the greater is the industry's progressiveness.E) B) and C)
F) A) and D)

Question 14

Process innovation causes an upward shift in a firm's total product curve and:

Accepted Answer

A)   a decrease in its average product.
B)   a downward shift in its average total cost curve.
C)   an upward shift in its average total cost curve.
D)   an upward shift in its marginal revenue curve.E) A) and D)
F) All of the above

Question 15

The successful commercial introduction of a new product,the use of a new method,or the creation of a new form of business enterprise is called:

Accepted Answer

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

Question 16

Legal protections against competitors producing and selling a product identical to the one you invented are called _________;legal protections against competitors using your product's name are called __________.

Accepted Answer

A)   patents;trademarks
B)   trademarks;copyrights
C)   copyrights;patents
D)   trademarks;patentsE) A) and D)
F) A) and C)

Question 17

The wide imitation and spread of an innovation is called:

Accepted Answer

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

Question 18

The interest-rate cost-of-funds curve is perfectly elastic because expected rates of return on R&D are constant.

Accepted Answer

A) True 
 B)False  False

Question 19

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)

Question 20

For a new product to be profitable,it must:

Accepted Answer

A)   enable customers to obtain greater total utility from their money income.
B)   be less expensive than existing substitute products.
C)   have greater marginal utility than existing substitute products.
D)   embody process innovation.E) B) and D)
F) A) and B)

Exam 14: Technology RD and Efficiency

Even where imitation is possible,a firm may gain advantage from being the first to introduce an innovative product because of:

Correct AnswerverifiedShow Answer

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

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 AnswerverifiedB

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedD

Fast-second strategies are more likely to be used by:

Correct AnswerverifiedShow Answer

(Consider This) Violin strings made from sheep intestines were first called "catgut" because:

Correct AnswerverifiedShow Answer

Successful new products enable consumers to increase the total utility they obtain from a specific amount of their total spending.

Correct AnswerverifiedShow Answer

Kodak introduced to the marketplace a digital camera that uses no film but that takes photos that can be shown on personal computers.This is an example of:

Correct AnswerverifiedShow Answer

The major source of new scientific knowledge in the United States is:

Correct AnswerverifiedShow Answer

Technological advance improves allocative efficiency by:

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

In general,the:

Correct AnswerverifiedShow Answer

Process innovation causes an upward shift in a firm's total product curve and:

Correct AnswerverifiedShow Answer

The successful commercial introduction of a new product,the use of a new method,or the creation of a new form of business enterprise is called:

Correct AnswerverifiedShow Answer

Legal protections against competitors producing and selling a product identical to the one you invented are called _________;legal protections against competitors using your product's name are called __________.

Correct AnswerverifiedShow Answer

The wide imitation and spread of an innovation is called:

Correct AnswerverifiedShow Answer

The interest-rate cost-of-funds curve is perfectly elastic because expected rates of return on R&D are constant.

Correct AnswerverifiedFalse

Other things equal,the prospect of imitation by others:

Correct AnswerverifiedShow Answer

For a new product to be profitable,it must:

Correct AnswerverifiedShow Answer

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D

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Legal protections against competitors producing and selling a product identical to the one you invented are called _;legal protections against competitors using your product's name are called __.

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False

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