Question 1

When a firm invests in new technology, the _______ that the firm receives are _______.

Accepted Answer

A)  private benefits; only a portion of the overall social benefits 
B)  social benefits; only a portion of the overall private benefits 
C)  private benefits; about three-quarters of the economic benefits 
D)  social benefits; about one-third of the overall private benefits 
A)  private benefits; only a portion of the overall social benefits 
B)  social benefits; only a portion of the overall private benefits 
C)  private benefits; about three-quarters of the economic benefits 
D)  social benefits; about one-third of the overall private benefits

Question 2

Government has a variety of policies that allow inventors to _______, such as the granting patents and _______.

Accepted Answer

A)  receive an increased rate of return; subsidization of research and development 
B)  protect their inventions; limited copyrights during the inventor's lifetime 
C)  register their inventions; unlimited copyrights during the inventor's lifetime 
D)  receive a reasonable rate of return; lifetime intellectual property rights. 
A)  receive an increased rate of return; subsidization of research and development 
B)  protect their inventions; limited copyrights during the inventor's lifetime 
C)  register their inventions; unlimited copyrights during the inventor's lifetime 
D)  receive a reasonable rate of return; lifetime intellectual property rights.

Question 3

Tom, Mary and Jill have apartments in the same building. A security system for their building costs $750. Tom is willing to pay $100 for the security system, Mary is willing to pay $300 and Jill is willing to pay $300. They have a meeting to vote on whether to pay $250 each for the security system. At least two of them must vote for the system to be installed before the vote is passed.
The efficient outcome is to have the security system installed. After the meeting the security system will _______, which illustrates _______.

Accepted Answer

A)  be installed, the free rider problem 
B)  not be installed, the free rider problem 
C)  be installed, a negative externality 
D)  not be installed, a negative externality 
A)  be installed, the free rider problem 
B)  not be installed, the free rider problem 
C)  be installed, a negative externality 
D)  not be installed, a negative externality

Question 4

Paddy and Mick are the only two inhabitants of a small island off the coast of Ireland. They burn coal to keep their houses warm at night. However, this coal burning is harming the air quality on their island. Both Paddy and Mick could install air filters on their chimneys. These filters cost 50 each. Each filter provides a social benefit of 80, but those benefits are divided equally among Paddy and Mick. If both Paddy and Mick install the filters

Accepted Answer

A)  both will gain 10 
B)  both will gain 0 
C)  both will lose 30 
D)  both will gain 30 
A)  both will gain 10 
B)  both will gain 0 
C)  both will lose 30 
D)  both will gain 30

Question 5

A highly innovative firm operating in a competitive market will usually have

Accepted Answer

A)  a permanent edge over its competitors. 
B)  a lack of ability to earn reasonable profits. 
C)  vast numbers of competitors catching up to its innovations. 
D)  some time before competitors catch up to its innovations. 
A)  a permanent edge over its competitors. 
B)  a lack of ability to earn reasonable profits. 
C)  vast numbers of competitors catching up to its innovations. 
D)  some time before competitors catch up to its innovations.

Question 6

On average, it can cost _______ and take _______ to discover a new drug, perform the necessary safety tests, and bring the drug to market.

Accepted Answer

A)  $500 million; five years 
B)  $100 million; a year 
C)  $800 million; more than a decade 
D)  $300 million; less than a decade 
A)  $500 million; five years 
B)  $100 million; a year 
C)  $800 million; more than a decade 
D)  $300 million; less than a decade

Question 7

If some of the products developed by I'mASoftwareCo. must face market competition that can very quickly produce either an identical product or a close substitute for it, then

Accepted Answer

A)  it may decide against R&D projects of this sort. 
B)  it will have to figure out innovative ways to prevent adaptation and copying of its products. 
C)  the other firms will all save on their R&D costs. 
D)  it must charge more for its products to quickly compensate for the research and development costs. 
A)  it may decide against R&D projects of this sort. 
B)  it will have to figure out innovative ways to prevent adaptation and copying of its products. 
C)  the other firms will all save on their R&D costs. 
D)  it must charge more for its products to quickly compensate for the research and development costs.

Question 8

Once it's patent application has been accepted, a firm is able to earn _______ on its product, which _______.

Accepted Answer

A)  an increased rate of return for investors; raises doubts further R&D activities 
B)  more profit; will allow it to recover the biggest slice of the social value created 
C)  monopoly profits; offers an incentive for research and development to take place 
D)  competitive profits; creates incentive for continuing innovative R&D projects 
A)  an increased rate of return for investors; raises doubts further R&D activities 
B)  more profit; will allow it to recover the biggest slice of the social value created 
C)  monopoly profits; offers an incentive for research and development to take place 
D)  competitive profits; creates incentive for continuing innovative R&D projects

Question 9

In the context of both positive externalities and public goods, briefly explain why private firms or individuals might fail to make expenditures or investments that would produce broad social benefits.

Accepted Answer

With regard to both positive externaliti

Question 10

CleanAir Motors Inc. wants to build electric cars with no emissions. However, electric motors require innovative battery technology for adequate energy storage to meet basic daily commuting needs. The company has several possibilities for alternative battery technology, along with estimates of how these approaches would affect their costs of producing the cars and their sales of the cars. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain private rate of return. Every investment would have an additional 2% social return: that is, an investment that pays at least a 6% return to the car company will pay at least an 8% return for society as a whole.
 
If the opportunity cost of financial capital for CleanAir Motors Inc. is 10%, CleanAir Motors Inc. will
Invest _______ in R&D if it receives both the private and social benefits of this investment.

Accepted Answer

A)  $2000 
B)  $1500 
C)  $1000 
D)  $500 
A)  $2000 
B)  $1500 
C)  $1000 
D)  $500

Question 11

It is commonly understood that every invention

Accepted Answer

A)  has its own story of discovery and development. 
B)  often involved a parade of characters and firms. 
C)  has a unique story that develops over years or decades. 
D)  often results in new technology and all of the above. 
A)  has its own story of discovery and development. 
B)  often involved a parade of characters and firms. 
C)  has a unique story that develops over years or decades. 
D)  often results in new technology and all of the above.

Question 12

When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being

Accepted Answer

A)  unexcludable 
B)  free rider 
C)  public good 
D)  nonexcludable 
A)  unexcludable 
B)  free rider 
C)  public good 
D)  nonexcludable

Question 13

Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology?

Accepted Answer

A)  intellectual property rights 
B)  government research and development grants 
C)  cooperative research ventures between companies 
D)  patents, copyrights, and each of the above 
A)  intellectual property rights 
B)  government research and development grants 
C)  cooperative research ventures between companies 
D)  patents, copyrights, and each of the above

Question 14

Which of the following would be classified as a positive externality?

Accepted Answer

A)  a surcharge for ambulance service is shifted to property taxes 
B)  reselling outdated textbooks to under-funded public schools 
C)  removing government education subsidies for public schools 
D)  converting a derelict empty lot to a public vegetable garden 
A)  a surcharge for ambulance service is shifted to property taxes 
B)  reselling outdated textbooks to under-funded public schools 
C)  removing government education subsidies for public schools 
D)  converting a derelict empty lot to a public vegetable garden

Question 15

The federal government funds _______ of the nation's basic research, much of which _______.

Accepted Answer

A)  more than half; carried out by private firms 
B)  less than half; conducted in the labs of private firms 
C)  about half; conducted at colleges and universities 
D)  more than half; conducted a government run facilities 
A)  more than half; carried out by private firms 
B)  less than half; conducted in the labs of private firms 
C)  about half; conducted at colleges and universities 
D)  more than half; conducted a government run facilities

Question 16

Why did Gordon Gould have to endure a lengthy legal battle in order to receive a patent for his innovative laser idea concocted in 1957?

Accepted Answer

A)  by 1957, several other scientists had filed patents ahead of him, but none of their laser inventions worked 
B)  he delayed applying to patent his idea, mistakenly believing he needed to have a working laser to apply 
C)  by 1957, his laser was no longer the inspiration of a single person. 
D)  by 1957, his laser technology overlapped previous laser patents. 
A)  by 1957, several other scientists had filed patents ahead of him, but none of their laser inventions worked 
B)  he delayed applying to patent his idea, mistakenly believing he needed to have a working laser to apply 
C)  by 1957, his laser was no longer the inspiration of a single person. 
D)  by 1957, his laser technology overlapped previous laser patents.

Question 17

Ideally, a patent should cover a long enough period of time for the inventor to _______
, but that period should not be so long that it allows the inventor to _______.

Accepted Answer

A)  earn a hearty return; charge a high monopoly price permanently 
B)  contribute to the social interest; only receive a slice of the social benefits 
C)  earn a rate of return; prevent broad public access to classic works 
D)  contribute to the social interest; prevent broad public access to inventions 
A)  earn a hearty return; charge a high monopoly price permanently 
B)  contribute to the social interest; only receive a slice of the social benefits 
C)  earn a rate of return; prevent broad public access to classic works 
D)  contribute to the social interest; prevent broad public access to inventions

Question 18

Raven Farms raises a substantial number of bees and uses the honey to produce its own skin healing cream. Raven Farms is situated next to the Oakcreek Apple Orchard. The bees from Raven Farms pollinate Oakcreek's apple trees. In this instance, Raven Farms

Accepted Answer

A)  derives more private benefits and provides less social benefit. 
B)  provides more social benefits than it derives in private benefits. 
C)  provides a marginal social benefit and derives a complete private benefit. 
D)  provides a complete social benefit and derives a marginal private benefit. 
A)  derives more private benefits and provides less social benefit. 
B)  provides more social benefits than it derives in private benefits. 
C)  provides a marginal social benefit and derives a complete private benefit. 
D)  provides a complete social benefit and derives a marginal private benefit.

Question 19

YummyCandiesCo. has developed a new candy bar that contains a full recommended daily allowance of vitamins and minerals. This invention will provide considerable spillover benefits to society. The table below shows the demand for the candy bars, the supply of candy bars if the company receives only the private benefits, and the supply of candy bars if the firm also receives the full social benefits.

If the new candy bar were sold based only on private benefits, the equilibrium price and quantity would be

Accepted Answer

A)  $4, 100,000 
B)  $3, 150,000 
C)  $2, 200,000 
D)  $1, 250,000 
A)  $4, 100,000 
B)  $3, 150,000 
C)  $2, 200,000 
D)  $1, 250,000

Question 20

When technology is advancing so quickly, even a patent from, say, two years ago may be _______
, because _______.

Accepted Answer

A)  somewhat outdated; few firms are relying on the technology 
B)  completely outdated; no firm is relying on that technology any longer 
C)  irrelevant; inventors are only receiving a slice of the social value. 
D)  irrelevant; not every idea can remain under patent protection forever. 
A)  somewhat outdated; few firms are relying on the technology 
B)  completely outdated; no firm is relying on that technology any longer 
C)  irrelevant; inventors are only receiving a slice of the social value. 
D)  irrelevant; not every idea can remain under patent protection forever.

When a firm invests in new technology, the _ that the firm receives are _.

Government has a variety of policies that allow inventors to _, such as the granting patents and _.

A highly innovative firm operating in a competitive market will usually have

On average, it can cost _ and take _ to discover a new drug, perform the necessary safety tests, and bring the drug to market.

If some of the products developed by I'mASoftwareCo. must face market competition that can very quickly produce either an identical product or a close substitute for it, then

Once it's patent application has been accepted, a firm is able to earn _ on its product, which _.

In the context of both positive externalities and public goods, briefly explain why private firms or individuals might fail to make expenditures or investments that would produce broad social benefits.

It is commonly understood that every invention

When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being

Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology?

Which of the following would be classified as a positive externality?

The federal government funds _ of the nation's basic research, much of which _.

Why did Gordon Gould have to endure a lengthy legal battle in order to receive a patent for his innovative laser idea concocted in 1957?

Ideally, a patent should cover a long enough period of time for the inventor to _ , but that period should not be so long that it allows the inventor to _.

Raven Farms raises a substantial number of bees and uses the honey to produce its own skin healing cream. Raven Farms is situated next to the Oakcreek Apple Orchard. The bees from Raven Farms pollinate Oakcreek's apple trees. In this instance, Raven Farms

When technology is advancing so quickly, even a patent from, say, two years ago may be _ , because _.

Welcome to Economics

Choice in a World of Scarcity

Demand and Supply

Labor and Financial Markets

Elasticity

Consumer Choices

Cost and Industry Structure

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Monopoly and Antitrust Policy

Environmental Protection and Negative Externalities

Poverty and Economic Inequality

Issues in Labor Markets: Unions, Discrimination, Immigration

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Exam 13: Positive Externalities and Public Goods

When a firm invests in new technology, the _______ that the firm receives are _______.

Government has a variety of policies that allow inventors to _______, such as the granting patents and _______.

A highly innovative firm operating in a competitive market will usually have

On average, it can cost _______ and take _______ to discover a new drug, perform the necessary safety tests, and bring the drug to market.

If some of the products developed by I'mASoftwareCo. must face market competition that can very quickly produce either an identical product or a close substitute for it, then

Once it's patent application has been accepted, a firm is able to earn _______ on its product, which _______.

In the context of both positive externalities and public goods, briefly explain why private firms or individuals might fail to make expenditures or investments that would produce broad social benefits.

It is commonly understood that every invention

When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being

Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology?

Which of the following would be classified as a positive externality?

The federal government funds _______ of the nation's basic research, much of which _______.

Why did Gordon Gould have to endure a lengthy legal battle in order to receive a patent for his innovative laser idea concocted in 1957?

Ideally, a patent should cover a long enough period of time for the inventor to _______ , but that period should not be so long that it allows the inventor to _______.

Raven Farms raises a substantial number of bees and uses the honey to produce its own skin healing cream. Raven Farms is situated next to the Oakcreek Apple Orchard. The bees from Raven Farms pollinate Oakcreek's apple trees. In this instance, Raven Farms

When technology is advancing so quickly, even a patent from, say, two years ago may be _______ , because _______.

Welcome to Economics

Choice in a World of Scarcity

Demand and Supply

Labor and Financial Markets

Elasticity

Consumer Choices

Cost and Industry Structure

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Monopoly and Antitrust Policy

Environmental Protection and Negative Externalities

Poverty and Economic Inequality

Issues in Labor Markets: Unions, Discrimination, Immigration

Information, Risk, and Insurance

Financial Markets

Public Economy

International Trade

Globalization and Protectionism

Filters

When a firm invests in new technology, the _ that the firm receives are _.

Government has a variety of policies that allow inventors to _, such as the granting patents and _.

On average, it can cost _ and take _ to discover a new drug, perform the necessary safety tests, and bring the drug to market.

Once it's patent application has been accepted, a firm is able to earn _ on its product, which _.

The federal government funds _ of the nation's basic research, much of which _.

Ideally, a patent should cover a long enough period of time for the inventor to _ , but that period should not be so long that it allows the inventor to _.

When technology is advancing so quickly, even a patent from, say, two years ago may be _ , because _.