Question 1

Refer to the data. At $20 million of R&D expenditures, the

Accepted Answer

A) marginal cost of R&D exceeds the marginal benefit. 
B) expected total return from R&D is at a maximum. 
C) interest-rate cost of funds is negative. 
D) marginal benefit of R&D exceeds the marginal cost. 
A) marginal cost of R&D exceeds the marginal benefit. 
B) expected total return from R&D is at a maximum. 
C) interest-rate cost of funds is negative. 
D) marginal benefit of R&D exceeds the marginal cost.

Question 2

Venture capital is another name for retained earnings.

Accepted Answer

A) True 
 B)False

Question 3

The table shows the expected rate of return, R&D spending, and interest-rate cost-of-funds for a hypothetical firm. In a graph for determining the optimal R&D expenditure, the interest-cost of funds curve would be a(n)

Accepted Answer

A) upsloping line within the range $35M to $75M. 
B) horizontal line at 7 percent. 
C) upsloping line within the range 5 to 13 percent. 
D) downsloping line within the range 13 to 5 percent. 
A) upsloping line within the range $35M to $75M. 
B) horizontal line at 7 percent. 
C) upsloping line within the range 5 to 13 percent. 
D) downsloping line within the range 13 to 5 percent.

Question 4

Henry Ford's development of an assembly method for building cars and trucks would be an example of

Accepted Answer

A) product improvement. 
B) fast-second strategy. 
C) process innovation. 
D) inverted-U theory. 
A) product improvement. 
B) fast-second strategy. 
C) process innovation. 
D) inverted-U theory.

Question 5

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a firm anticipates that an R&D expenditure of $100 million will result in a new production process that will reduce costs and thus create a one-time added profit of $112 million a year later. The firm's expected rate of return is

Accepted Answer

A) 0.12 percent. 
B) 12 percent. 
C) 112 percent. 
D) 2 percent. 
A) 0.12 percent. 
B) 12 percent. 
C) 112 percent. 
D) 2 percent.

Question 7

Other things equal, patents

Accepted Answer

A) decrease the expected rate of return on an R&D expenditure. 
B) increase the expected rate of return on an R&D expenditure. 
C) increase the interest-rate cost of funds used to finance an R&D expenditure. 
D) decrease the interest-rate cost of funds used to finance an R&D expenditure. 
A) decrease the expected rate of return on an R&D expenditure. 
B) increase the expected rate of return on an R&D expenditure. 
C) increase the interest-rate cost of funds used to finance an R&D expenditure. 
D) decrease the interest-rate cost of funds used to finance an R&D expenditure.

Question 8

The central idea illustrated by the vignette on "catgut" used as violin strings is

Accepted Answer

A) patent rights. 
B) research and development activity. 
C) derived demand. 
D) trade secrets. 
A) patent rights. 
B) research and development activity. 
C) derived demand. 
D) trade secrets.

Question 9

Refer to the data. The firm's optimal amount of R&D spending is

Accepted Answer

A) $20 million. 
B) $40 million. 
C) $60 million. 
D) $80 million. 
A) $20 million. 
B) $40 million. 
C) $60 million. 
D) $80 million.

Question 10

In the graph, the interest-rate cost-of-funds curve would be the line connecting points

Accepted Answer

A) a, c, and e. 
B) b, c, and e. 
C) b, c, and d. 
D) a, c, and d. 
A) a, c, and e. 
B) b, c, and e. 
C) b, c, and d. 
D) a, c, and d.

Question 11

Suppose that Marlen Fisher has legal protection against anyone producing and selling a fishing lure identical to his unique-action "MarFish" lure, whatever the competitor might name the lure. This legal protection is most likely to be a

Accepted Answer

A) trademark. 
B) restraining order. 
C) patent. 
D) copyright. 
A) trademark. 
B) restraining order. 
C) patent. 
D) copyright.

Question 12

Suppose that Book-Cost Busters (BCB), without authorization, reproduced a best-selling novel and placed it for downloading on the BCB pay-for-use website. This action would violate the publisher's

Accepted Answer

A) profit rights. 
B) patent. 
C) copyright. 
D) trademark. 
A) profit rights. 
B) patent. 
C) copyright. 
D) trademark.

Question 13

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 14

In the inverted-U theory of R&D,

Accepted Answer

A) process innovation and product innovation are inversely related. 
B) technological change is inversely related to scientific discovery. 
C) R&D expenditures rise continuously as a percentage of firms' sales as industry concentration rises. 
D) R&D expenditures first rise as a percentage of firms' sales as industry concentration increases, but then fall as higher industry concentration occurs. 
A) process innovation and product innovation are inversely related. 
B) technological change is inversely related to scientific discovery. 
C) R&D expenditures rise continuously as a percentage of firms' sales as industry concentration rises. 
D) R&D expenditures first rise as a percentage of firms' sales as industry concentration increases, but then fall as higher industry concentration occurs.

Question 15

Describe R&D expenditures in the United States. What percentage of spending goes for invention, innovation, and diffusion?

Accepted Answer

Research and development expenditures in

Question 16

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 17

U.S. firms collectively devote the largest portion of their total R&D spending to

Accepted Answer

A) applied research (pursuing invention). 
B) basic scientific research. 
C) innovation and diffusion. 
D) financing start-up firms. 
A) applied research (pursuing invention). 
B) basic scientific research. 
C) innovation and diffusion. 
D) financing start-up firms.

Question 18

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 19

The corporate decision on type and level of R&D activity is difficult because

Accepted Answer

A) the interest-rate cost of funds is difficult to estimate. 
B) much of corporate R&D is based on the pursuit of science, not on the profit motive. 
C) expected returns lie in the future and are highly uncertain. 
D) total returns and marginal returns greatly diverge. 
A) the interest-rate cost of funds is difficult to estimate. 
B) much of corporate R&D is based on the pursuit of science, not on the profit motive. 
C) expected returns lie in the future and are highly uncertain. 
D) total returns and marginal returns greatly diverge.

Question 20

Other things equal, trademarks and brand names

Accepted Answer

A) increase the interest-rate cost of funds used to finance R&D expenditures. 
B) decrease the interest-rate cost of funds used to finance R&D expenditures. 
C) decrease the expected rate of return on R&D expenditures. 
D) increase the expected rate of return on R&D expenditures. 
A) increase the interest-rate cost of funds used to finance R&D expenditures. 
B) decrease the interest-rate cost of funds used to finance R&D expenditures. 
C) decrease the expected rate of return on R&D expenditures. 
D) increase the expected rate of return on R&D expenditures.

Exam 15: Technology, RD, and Efficiency

Refer to the data. At $20 million of R&D expenditures, the

Venture capital is another name for retained earnings.

The table shows the expected rate of return, R&D spending, and interest-rate cost-of-funds for a hypothetical firm. In a graph for determining the optimal R&D expenditure, the interest-cost of funds curve would be a(n)

Henry Ford's development of an assembly method for building cars and trucks would be an example of

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Suppose a firm anticipates that an R&D expenditure of $100 million will result in a new production process that will reduce costs and thus create a one-time added profit of $112 million a year later. The firm's expected rate of return is

Other things equal, patents

The central idea illustrated by the vignette on "catgut" used as violin strings is

Refer to the data. The firm's optimal amount of R&D spending is

In the graph, the interest-rate cost-of-funds curve would be the line connecting points

Suppose that Marlen Fisher has legal protection against anyone producing and selling a fishing lure identical to his unique-action "MarFish" lure, whatever the competitor might name the lure. This legal protection is most likely to be a

Suppose that Book-Cost Busters (BCB), without authorization, reproduced a best-selling novel and placed it for downloading on the BCB pay-for-use website. This action would violate the publisher's

Venture capital refers to

In the inverted-U theory of R&D,

Describe R&D expenditures in the United States. What percentage of spending goes for invention, innovation, and diffusion?

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

U.S. firms collectively devote the largest portion of their total R&D spending to

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

The corporate decision on type and level of R&D activity is difficult because

Other things equal, trademarks and brand names

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, 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

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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