Question 1

The process by which new product or production methods are introduced is called the Industrial Revolution.

Accepted Answer

A) True 
 B)False

Question 2

During the twentieth century, the real income of the average American grew by a factor of more than seven.

Accepted Answer

A) True 
 B)False

Question 3

"Pricing the product of a firm with high and continuing R&D costs at marginal cost is recipe for financial suicide".Do you agree with this statement?

Accepted Answer

Yes, because a firm is not expected to c

Question 4

Briefly explain Schumpeter's model of innovation.Why does an innovator's economic profit eventually reduce to zero?

Accepted Answer

Professor Schumpeter argued that the suc

Question 5

Spending on innovation can be modeled in terms of a kinked marginal revenue curve.Explain what this model predicts about how rivals will react to a firm increasing its spending on innovation compared with decreasing its spending, and how that affects the firm's revenues.

Accepted Answer

The kinked MR curve (Z shaped) shows tha

Question 6

Applied research is research

Accepted Answer

A)  whose goal is to invent or improve products or processes. 
B)  that rarely has any commercial objective attached. 
C)  that deals with general principles. 
D)  that seeks to provide scientific knowledge. 
A)  whose goal is to invent or improve products or processes. 
B)  that rarely has any commercial objective attached. 
C)  that deals with general principles. 
D)  that seeks to provide scientific knowledge.

Question 7

A profit maximizing firm will continue to spend on R&D until the point where the marginal revenue from R&D is equal to its marginal cost.

Accepted Answer

A) True 
 B)False

Question 8

Any arrangement in which a firm voluntarily makes its privately owned technology available to other firms in exchange for access to the technology of the second company, or for payment of an agreed-upon fee, is defined as

Accepted Answer

A)  cross licensing of patents 
B)  technology trading 
C)  process innovation. 
D)  a ratchet. 
E)  product innovation. 
A)  cross licensing of patents 
B)  technology trading 
C)  process innovation. 
D)  a ratchet. 
E)  product innovation.

Question 9

Per-capita income in an economy

Accepted Answer

A)  is the net income of that economy. 
B)  is the average income of all people in that economy. 
C)  is the difference between exports and imports in that economy. 
D)  is the difference between earnings and consumption of all people in that economy. 
A)  is the net income of that economy. 
B)  is the average income of all people in that economy. 
C)  is the difference between exports and imports in that economy. 
D)  is the difference between earnings and consumption of all people in that economy.

Question 10

If the marginal revenue from R&D is greater than the marginal cost, a profit maximizing firm will spend less on R&D.

Accepted Answer

A) True 
 B)False

Question 11

Who is credited as the originator of modern microtheory of innovation?

Accepted Answer

A)  Mountifort Longfield 
B)  Adam Smith 
C)  Wassily Leontief 
D)  Joseph Schumpeter 
A)  Mountifort Longfield 
B)  Adam Smith 
C)  Wassily Leontief 
D)  Joseph Schumpeter

Question 12

Research and Development are risky activities.According to marketing literature, a very small percentage of new products ever make it to the marketing stage.How do firms attempt to share the risks of spending on R&D?

Accepted Answer

Rather than compete in terms of price, f

Question 13

Which of the following can be said about the average growth rates of per capita income about the entire 1,500 years before the industrial revolution?

Accepted Answer

A)  Hovered around three percent. 
B)  Approximated zero percent. 
C)  Mostly above four percent. 
D)  Extremely negative. 
A)  Hovered around three percent. 
B)  Approximated zero percent. 
C)  Mostly above four percent. 
D)  Extremely negative.

Question 14

A firm will equate the marginal cost of research and development with the marginal revenue it generates, to determine how much money it will allocate to research and development.

Accepted Answer

A) True 
 B)False

Question 15

From the Industrial Revolution to the present, innovation has played a major role in the growth of output.What do the leading analysts of economic growth argue were some of the most significant innovations of this period?

Accepted Answer

Leading analysts of economic grow argue

Question 16

Why has the free market system produced the most rapid rates of growth of any economic system?

Accepted Answer

The features of competitive markets put

Question 17

Economists believe that the free market will tend to under-provide resources for acquisition of new technical knowledge.

Accepted Answer

A) True 
 B)False

Question 18

Private firms

Accepted Answer

A)  are more likely to fund basic research than applied research. 
B)  are more likely to fund applied research than basic research. 
C)  are equally likely to fund basic research and applied research. 
D)  are unlikely to fund either basic research or applied research. 
E)  will never fund basic research, but will fund applied research. 
A)  are more likely to fund basic research than applied research. 
B)  are more likely to fund applied research than basic research. 
C)  are equally likely to fund basic research and applied research. 
D)  are unlikely to fund either basic research or applied research. 
E)  will never fund basic research, but will fund applied research.

Question 19

Schumpeter's model argues that the successful innovative entrepreneur's reward is

Accepted Answer

A)  zero economic profit. 
B)  perfect competition. 
C)  a monopoly profit. 
D)  economies of scope. 
A)  zero economic profit. 
B)  perfect competition. 
C)  a monopoly profit. 
D)  economies of scope.

Question 20

As of 2009, the income of the average American was about ____ times larger than in 1900.

Accepted Answer

A)  2.0 
B)  7.5 
C)  22.5 
D)  45.3 
E)  46.4 
A)  2.0 
B)  7.5 
C)  22.5 
D)  45.3 
E)  46.4

Exam 16: The Market's Prime Achievement: Innovation and Growth

The process by which new product or production methods are introduced is called the Industrial Revolution.

During the twentieth century, the real income of the average American grew by a factor of more than seven.

"Pricing the product of a firm with high and continuing R&D costs at marginal cost is recipe for financial suicide".Do you agree with this statement?

Briefly explain Schumpeter's model of innovation.Why does an innovator's economic profit eventually reduce to zero?

Spending on innovation can be modeled in terms of a kinked marginal revenue curve.Explain what this model predicts about how rivals will react to a firm increasing its spending on innovation compared with decreasing its spending, and how that affects the firm's revenues.

Applied research is research

A profit maximizing firm will continue to spend on R&D until the point where the marginal revenue from R&D is equal to its marginal cost.

Any arrangement in which a firm voluntarily makes its privately owned technology available to other firms in exchange for access to the technology of the second company, or for payment of an agreed-upon fee, is defined as

Per-capita income in an economy

If the marginal revenue from R&D is greater than the marginal cost, a profit maximizing firm will spend less on R&D.

Who is credited as the originator of modern microtheory of innovation?

Research and Development are risky activities.According to marketing literature, a very small percentage of new products ever make it to the marketing stage.How do firms attempt to share the risks of spending on R&D?

Which of the following can be said about the average growth rates of per capita income about the entire 1,500 years before the industrial revolution?

A firm will equate the marginal cost of research and development with the marginal revenue it generates, to determine how much money it will allocate to research and development.

From the Industrial Revolution to the present, innovation has played a major role in the growth of output.What do the leading analysts of economic growth argue were some of the most significant innovations of this period?

Why has the free market system produced the most rapid rates of growth of any economic system?

Economists believe that the free market will tend to under-provide resources for acquisition of new technical knowledge.

Private firms

Schumpeter's model argues that the successful innovative entrepreneur's reward is

As of 2009, the income of the average American was about ____ times larger than in 1900.

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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