Question 1

As it relates to R&D, a firm's expected-rate-of-return-curve, r,

Accepted Answer

A) slopes downward because the firm arrays, highest to lowest, the rates of return on R&D activities. 
B) slopes upward because of the law of diminishing returns. 
C) is a horizontal line. 
D) depends on whether it borrows from the bank or uses retained earnings in financing R&D. 
A) slopes downward because the firm arrays, highest to lowest, the rates of return on R&D activities. 
B) slopes upward because of the law of diminishing returns. 
C) is a horizontal line. 
D) depends on whether it borrows from the bank or uses retained earnings in financing R&D.

Question 2

The marginal benefit to a firm from its R&D expenditures is depicted by its

Accepted Answer

A) interest-rate cost-of-funds curve. 
B) expected-rate-of-return curve. 
C) venture capital acquisition curve. 
D) retained earnings payout curve. 
A) interest-rate cost-of-funds curve. 
B) expected-rate-of-return curve. 
C) venture capital acquisition curve. 
D) retained earnings payout curve.

Question 3

(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." 
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."

Question 4

A "fast-second strategy" refers to a situation where small competitors of a dominant firm will wait for the dominant firm to innovate, and then quickly imitate the dominant firm's innovations.

Accepted Answer

A) True 
 B)False

Question 5

The optimal market structure for technological advance seems to be an industry in which

Accepted Answer

A) most firms are purely competitive. 
B) there is a natural monopoly with a large market for the product. 
C) there are oligopolistic firms and several small and highly innovative firms. 
D) the government provides some funding for research and development. 
A) most firms are purely competitive. 
B) there is a natural monopoly with a large market for the product. 
C) there are oligopolistic firms and several small and highly innovative firms. 
D) the government provides some funding for research and development.

Question 6

Invention and innovation are not the same; innovation tends be derived from invention.

Accepted Answer

A) True 
 B)False

Question 7

About what percentage of research and development spending by businesses in the United States in 2012 went to development (innovation and imitation) and about what percentage went to basic and applied research and invention, respectively?

Accepted Answer

A) 20, 80 
B) 40, 60 
C) 80, 20 
D) 60, 40 
A) 20, 80 
B) 40, 60 
C) 80, 20 
D) 60, 40

Question 8

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 changes 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 valid conclusion can be drawn about the effect and reasons for the change?

Accepted Answer

A) It improved economic efficiency because more units could be produced at a lower ATC using the same amount of economic resources. 
B) It improved economic efficiency because more units could be produced at a lower ATC using fewer economic resources. 
C) It improved economic efficiency because more units could be produced at the same ATC using fewer economic resources. 
D) It reduced economic efficiency because fewer units could be produced at a higher ATC using more economic resources. 
A) It improved economic efficiency because more units could be produced at a lower ATC using the same amount of economic resources. 
B) It improved economic efficiency because more units could be produced at a lower ATC using fewer economic resources. 
C) It improved economic efficiency because more units could be produced at the same ATC using fewer economic resources. 
D) It reduced economic efficiency because fewer units could be produced at a higher ATC using more economic resources.

Question 9

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 unchanged 
A) TC increased by $2,000 
B) TC decreased by $2,000 
C) TC decreased by $4,000 
D) TC remained unchanged

Question 10

Gigantic Corporation follows a strategy of waiting for rivals to innovate, then quickly imitating any successful innovations.This behavior is known as

Accepted Answer

A) collusion. 
B) an entrepreneurial strategy. 
C) a fast-second strategy. 
D) pricing the demand curve. 
A) collusion. 
B) an entrepreneurial strategy. 
C) a fast-second strategy. 
D) pricing the demand curve.

Question 11

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

Question 12

If a firm develops better methods of producing a product, then this process innovation can be expected to result in a(n)

Accepted Answer

A) upward shift in both the total product and average cost curves. 
B) downward shift in both the total product and average cost curves. 
C) downward shift in the total product curve and an upward shift in the average cost curve. 
D) upward shift in the total product curve and a downward shift in the average cost curve. 
A) upward shift in both the total product and average cost curves. 
B) downward shift in both the total product and average cost curves. 
C) downward shift in the total product curve and an upward shift in the average cost curve. 
D) upward shift in the total product curve and a downward shift in the average cost curve.

Question 13

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

Question 14

In 2014, which of the following nations ranked highest in total R&D expenditures as a percentage of GDP?

Accepted Answer

A) the United States 
B) the United Kingdom 
C) Sweden 
D) China 
A) the United States 
B) the United Kingdom 
C) Sweden 
D) China

Question 15

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.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 are the total cost and average cost of producing the 3,000 units of output?

Accepted Answer

A) TC = $4,000; ATC = $2.00 
B) TC = $8,000; ATC = $3.00 
C) TC 
D) TC = 
A) TC = $4,000; ATC = $2.00 
B) TC = $8,000; ATC = $3.00 
C) TC 
D) TC =

Question 16

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 17

Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic.Which of the following would increase a firm's optimal R&D expenditures and, in equilibrium, reduce 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 
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

Question 18

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. 
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.

Question 19

One of the outcomes for society from product innovation is

Accepted Answer

A) more concentration in industry. 
B) less scientific research. 
C) greater total utility. 
D) fewer mergers. 
A) more concentration in industry. 
B) less scientific research. 
C) greater total utility. 
D) fewer mergers.

Question 20

Which market structure is most likely to have the means and some incentive to innovate?

Accepted Answer

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

Exam 15: Technology, Rd, and Efficiency

As it relates to R&D, a firm's expected-rate-of-return-curve, r,

The marginal benefit to a firm from its R&D expenditures is depicted by its

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

A "fast-second strategy" refers to a situation where small competitors of a dominant firm will wait for the dominant firm to innovate, and then quickly imitate the dominant firm's innovations.

The optimal market structure for technological advance seems to be an industry in which

Invention and innovation are not the same; innovation tends be derived from invention.

About what percentage of research and development spending by businesses in the United States in 2012 went to development (innovation and imitation) and about what percentage went to basic and applied research and invention, respectively?

Gigantic Corporation follows a strategy of waiting for rivals to innovate, then quickly imitating any successful innovations.This behavior is known as

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

If a firm develops better methods of producing a product, then this process innovation can be expected to result in a(n)

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

In 2014, which of the following nations ranked highest in total R&D expenditures as a percentage of GDP?

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.

Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic.Which of the following would increase a firm's optimal R&D expenditures and, in equilibrium, reduce the expected rate of return on the last dollar of R&D?

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

One of the outcomes for society from product innovation is

Which market structure is most likely to have the means and some incentive to innovate?

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

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Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

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Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

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Aggregate Demand and Aggregate Supply

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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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