Question 1

The profit-enhancing impact of process innovation tends to be on all of the following, except

Accepted Answer

A) the firm's TP or MP curves. 
B) the firm's MR curve. 
C) the firm's cost curves. 
D) the firm's productivity. 
A) the firm's TP or MP curves. 
B) the firm's MR curve. 
C) the firm's cost curves. 
D) the firm's productivity.

Question 2

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. 
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.

Question 3

The modern view of technological advance is that it is an external force to which the economy adjusts.

Accepted Answer

A) True 
 B)False

Question 4

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. 
A) enhancing monopoly power. 
B) reducing income inequality. 
C) giving society a more-preferred mix of goods and services. 
D) encouraging saving.

Question 5

Which market structure has a strong incentive for product development and differentiation?

Accepted Answer

A) monopolistic competition 
B) pure competition 
C) pure monopoly 
D) oligopoly 
A) monopolistic competition 
B) pure competition 
C) pure monopoly 
D) oligopoly

Question 6

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. 
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.

Question 7

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. 
A) innovation. 
B) invention. 
C) creative destruction. 
D) diffusion.

Question 8

When economists view technological change as internal to the economy, they mean that it

Accepted Answer

A) occurs randomly. 
B) occurs accidentally. 
C) arises deliberately from the profit motive and competition. 
D) arises mainly from government subsidies. 
A) occurs randomly. 
B) occurs accidentally. 
C) arises deliberately from the profit motive and competition. 
D) arises mainly from government subsidies.

Question 9

Venture capital refers to

Accepted Answer

A) equipment and factories. 
B) financing for start-ups. 
C) entrepreneurs who start businesses. 
D) creative destruction in capitalism. 
A) equipment and factories. 
B) financing for start-ups. 
C) entrepreneurs who start businesses. 
D) creative destruction in capitalism.

Question 10

Compared to the mid-1960s, the percentage of the U.S.Federal budget spent on R&D in recent years is

Accepted Answer

A) about the same. 
B) much smaller. 
C) slightly bigger. 
D) much bigger. 
A) about the same. 
B) much smaller. 
C) slightly bigger. 
D) much bigger.

Question 11

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. 
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.

Question 12

Process innovation leads to technological advance because it

Accepted Answer

A) decreases total product. 
B) increases average total costs. 
C) decreases productive efficiency. 
D) increases productive efficiency. 
A) decreases total product. 
B) increases average total costs. 
C) decreases productive efficiency. 
D) increases productive efficiency.

Question 13

Venture capital is another name for retained earnings.

Accepted Answer

A) True 
 B)False

Question 14

The outcomes from R&D expenditures by firms are

Accepted Answer

A) always profitable for the firms, if they have the funds available. 
B) the most costly use of funds by the firm. 
C) subject to economies of scale. 
D) expected, but not guaranteed. 
A) always profitable for the firms, if they have the funds available. 
B) the most costly use of funds by the firm. 
C) subject to economies of scale. 
D) expected, but not guaranteed.

Question 15

Suppose that a firm successfully introduces a highly profitable new product.If this new product is priced higher than existing substitute products, then the

Accepted Answer

A) new product has greater marginal utility than the existing products. 
B) laws of economics have been violated. 
C) new product must have increasing, not diminishing, marginal utility. 
D) existing products were unprofitable to produce. 
A) new product has greater marginal utility than the existing products. 
B) laws of economics have been violated. 
C) new product must have increasing, not diminishing, marginal utility. 
D) existing products were unprofitable to produce.

Question 16

In analyzing a market, the time horizon where technology can change and firms can offer new products is referred to as the

Accepted Answer

A) short run. 
B) very short run. 
C) long run. 
D) very long run. 
A) short run. 
B) very short run. 
C) long run. 
D) very long run.

Question 17

When corporations use retained earnings to finance the R&D for a new venture, the marginal cost of financing is zero.

Accepted Answer

A) True 
 B)False

Question 18

According to the inverted-U theory, R&D expenditures as a percentage of sales tend to be relatively low in

Accepted Answer

A) low-concentration industries only 
B) high-concentration industries only 
C) low- and high-concentration industries 
D) low- to middle-concentration industries 
A) low-concentration industries only 
B) high-concentration industries only 
C) low- and high-concentration industries 
D) low- to middle-concentration industries

Question 19

Which would be an example of innovation within an existing business firm?

Accepted Answer

A) the development of Post-it note pads by the 3M Corporation 
B) the granting of a patent to a university researcher 
C) the formation of the start-up firm Amgen 
D) the merger of AOL and Time-Warner 
A) the development of Post-it note pads by the 3M Corporation 
B) the granting of a patent to a university researcher 
C) the formation of the start-up firm Amgen 
D) the merger of AOL and Time-Warner

Question 20

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 the other answers are correct. 
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 the other answers are correct.

Exam 15: Technology, Rd, and Efficiency

The profit-enhancing impact of process innovation tends to be on all of the following, except

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

The modern view of technological advance is that it is an external force to which the economy adjusts.

Technological advance improves allocative efficiency by

Which market structure has a strong incentive for product development and differentiation?

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

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

When economists view technological change as internal to the economy, they mean that it

Venture capital refers to

Compared to the mid-1960s, the percentage of the U.S.Federal budget spent on R&D in recent years is

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

Process innovation leads to technological advance because it

Venture capital is another name for retained earnings.

The outcomes from R&D expenditures by firms are

Suppose that a firm successfully introduces a highly profitable new product.If this new product is priced higher than existing substitute products, then the

In analyzing a market, the time horizon where technology can change and firms can offer new products is referred to as the

When corporations use retained earnings to finance the R&D for a new venture, the marginal cost of financing is zero.

According to the inverted-U theory, R&D expenditures as a percentage of sales tend to be relatively low in

Which would be an example of innovation within an existing business firm?

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

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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