Question 1

In deciding on an optimal amount and type of research and development, firms should adhere to the rule: Expand R&D until

Accepted Answer

A) expected rate of return is zero. 
B) expected rate of return equals the interest rate. 
C) expected rate of return exceeds the interest rate by the greatest amount. 
D) the interest rate is constant. 
A) expected rate of return is zero. 
B) expected rate of return equals the interest rate. 
C) expected rate of return exceeds the interest rate by the greatest amount. 
D) the interest rate is constant.

Question 2

Most product innovations consist of minor changes to existing products and are incremental improvements.

Accepted Answer

A) True 
 B)False

Question 3

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.If the firm can produce 2,000 units of output by combining its fixed capital with 200 units of labor and 500 units of raw materials, what are the total cost (TC) and average total cost (ATC) of producing the 2,000 units of output?

Accepted Answer

A) TC = $4,000; ATC = $4.00 
B) TC = $8,000; ATC = $5.00 
C) TC = $12,000; ATC = $6.00 
D)  TC =$15,000; ATC = $8.00 
A) TC = $4,000; ATC = $4.00 
B) TC = $8,000; ATC = $5.00 
C) TC = $12,000; ATC = $6.00 
D)  TC =$15,000; ATC = $8.00

Question 4

The first working prototype of a microcomputer chip would be an example of an

Accepted Answer

A) innovation. 
B) imitation. 
C) invention. 
D) infusion. 
A) innovation. 
B) imitation. 
C) invention. 
D) infusion.

Question 5

In general, which of the following is true?

Accepted Answer

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

Question 6

Which of the following programs receives the smallest share of total Federal spending?

Accepted Answer

A) Social Security 
B) defense 
C) Medicare 
D) research & development 
A) Social Security 
B) defense 
C) Medicare 
D) research & development

Question 7

Technological advance consists of short-run adjustments to the production process that reduce costs.

Accepted Answer

A) True 
 B)False

Question 8

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.Difficulty: 02 Medium 
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.Difficulty: 02 Medium

Question 9

The role of entrepreneurs includes all of the following, except

Accepted Answer

A) forming start-up businesses. 
B) getting hired as the top executive of an established company. 
C) exploiting university and government scientific research. 
D) anticipating the future in pursuit of both monetary and nonmonetary rewards. 
A) forming start-up businesses. 
B) getting hired as the top executive of an established company. 
C) exploiting university and government scientific research. 
D) anticipating the future in pursuit of both monetary and nonmonetary rewards.

Question 10

Which of the following statements is most accurate about business R&D spending in the United States?

Accepted Answer

A) It is more or less equally distributed between innovation, invention, and basic research. 
B) Well over half is dedicated to innovation and imitation. 
C) The largest share is for basic research, as it provides the foundation, followed by invention and then innovation. 
D) The majority is spent on applied research. 
A) It is more or less equally distributed between innovation, invention, and basic research. 
B) Well over half is dedicated to innovation and imitation. 
C) The largest share is for basic research, as it provides the foundation, followed by invention and then innovation. 
D) The majority is spent on applied research.

Question 11

Which of the following correctly orders, highest to lowest, the relative magnitudes of U.S.spending by businesses on components of R&D?

Accepted Answer

A) invention, basic research, innovation 
B) invention, innovation, basic research 
C) innovation, invention, basic research 
D) basic research, invention, innovation 
A) invention, basic research, innovation 
B) invention, innovation, basic research 
C) innovation, invention, basic research 
D) basic research, invention, innovation

Question 12

Technological advance is a three-step process involving

Accepted Answer

A) invention, duplication, and diffusion. 
B) duplication, innovation, and diversity. 
C) invention, innovation, and diffusion. 
D) necessity, invention, and solution. 
A) invention, duplication, and diffusion. 
B) duplication, innovation, and diversity. 
C) invention, innovation, and diffusion. 
D) necessity, invention, and solution.

Question 13

The modern view of technological advance is that it

Accepted Answer

A) is rooted in the independent advance of science, an element largely external to the market system. 
B) is rarely carried out by oligopolists or pure monopolists. 
C) is an internal element of capitalism, occurring in response to profit incentives. 
D) necessarily destroys existing monopoly power. 
A) is rooted in the independent advance of science, an element largely external to the market system. 
B) is rarely carried out by oligopolists or pure monopolists. 
C) is an internal element of capitalism, occurring in response to profit incentives. 
D) necessarily destroys existing monopoly power.

Question 14

According to the inverted-U theory of R&D, other things equal, firms in industries with concentration ratios around 10 percent will be more technologically progressive than firms in industries with 50 percent concentration ratios.

Accepted Answer

A) True 
 B)False

Question 15

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 16

Entrepreneurs are those people who are

Accepted Answer

A) their own bosses. 
B) executive officers of corporations. 
C) salaried managers. 
D) working for research institutes. 
A) their own bosses. 
B) executive officers of corporations. 
C) salaried managers. 
D) working for research institutes.

Question 17

A patent on a new product benefits the firm securing it by

Accepted Answer

A) limiting the direct imitation of the product by rivals for many years. 
B) enabling the firm to retain "trade secrets" about the product. 
C) reducing the firm's legal expenses. 
D) increasing the speed of diffusion of the new product. 
A) limiting the direct imitation of the product by rivals for many years. 
B) enabling the firm to retain "trade secrets" about the product. 
C) reducing the firm's legal expenses. 
D) increasing the speed of diffusion of the new product.

Question 18

All of the following increase the expected rate of return on R&D expenditures except

Accepted Answer

A) patents. 
B) trademarks. 
C) imitation by others. 
D) trade secrets. 
A) patents. 
B) trademarks. 
C) imitation by others. 
D) trade secrets.

Question 19

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. 
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.

Question 20

The inverted-U theory suggests that R&D effort is strongest in very high concentration industries.

Accepted Answer

A) True 
 B)False

Exam 15: Technology, Rd, and Efficiency

In deciding on an optimal amount and type of research and development, firms should adhere to the rule: Expand R&D until

Most product innovations consist of minor changes to existing products and are incremental improvements.

The first working prototype of a microcomputer chip would be an example of an

In general, which of the following is true?

Which of the following programs receives the smallest share of total Federal spending?

Technological advance consists of short-run adjustments to the production process that reduce costs.

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

The role of entrepreneurs includes all of the following, except

Which of the following statements is most accurate about business R&D spending in the United States?

Which of the following correctly orders, highest to lowest, the relative magnitudes of U.S.spending by businesses on components of R&D?

Technological advance is a three-step process involving

The modern view of technological advance is that it

According to the inverted-U theory of R&D, other things equal, firms in industries with concentration ratios around 10 percent will be more technologically progressive than firms in industries with 50 percent concentration ratios.

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

Entrepreneurs are those people who are

A patent on a new product benefits the firm securing it by

All of the following increase the expected rate of return on R&D expenditures except

Creative destruction is not automatic because

The inverted-U theory suggests that R&D effort is strongest in very high concentration industries.

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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