Question 1

Technological advance improves productive efficiency by

Accepted Answer

A) lowering average total cost. 
B) increasing marginal utility. 
C) enhancing monopoly power. 
D) giving society a more-preferred mix of goods and services. 
A) lowering average total cost. 
B) increasing marginal utility. 
C) enhancing monopoly power. 
D) giving society a more-preferred mix of goods and services.

Question 2

The discovery of a product or process through the use of imagination, ingenious thinking, and experimentation is

Accepted Answer

A) process innovation. 
B) product innovation. 
C) invention. 
D) imitation. 
A) process innovation. 
B) product innovation. 
C) invention. 
D) imitation.

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

A "fast-second strategy" means that a dominant firm in an industry

Accepted Answer

A) uses just-in-time inventory control methods to speed production. 
B) cuts the development time for the introduction of a new product. 
C) lets smaller firms initiate new products and then quickly imitates the success. 
D) merges with the second largest firm in the industry to gain a larger market share. 
A) uses just-in-time inventory control methods to speed production. 
B) cuts the development time for the introduction of a new product. 
C) lets smaller firms initiate new products and then quickly imitates the success. 
D) merges with the second largest firm in the industry to gain a larger market share.

Question 5

Suppose that a firm's legal staff concludes that a new production process 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 6

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

Accepted Answer

A) True 
 B)False

Question 7

A firm decides to make a $40 million expenditure on research and development that will create a new product. This product is expected to generate a one-time increase in the firm's revenues by a total of $150 million a year later. The firm also estimates that the production cost of the new product will be $107 million, also realized one year after the initial R&D expenditure. What is the expected rate of return on this research and development expenditure?

Accepted Answer

A) 12.5 percent 
B) 9.3 percent 
C) 7.5 percent 
D) 28.7 percent 
A) 12.5 percent 
B) 9.3 percent 
C) 7.5 percent 
D) 28.7 percent

Question 8

Refer to the data for a consumer whose income = $12. Assume new product Z is introduced. How many units of Z will this consumer buy, given his or her $12 budget?

Accepted Answer

A) 6 units 
B) 4 units 
C) 2 units 
D) 0 units 
A) 6 units 
B) 4 units 
C) 2 units 
D) 0 units

Question 9

Many economists view technological advance as mainly a response to profit opportunities arising within a capitalist economy, and not some random external force.

Accepted Answer

A) True 
 B)False

Question 10

In choosing between an old reliable product and a new attractive product, the consumer will

Accepted Answer

A) always buy the product with the lower price. 
B) always buy the product with the higher MU. 
C) buy the one with the higher MU-to-P ratio. 
D) buy the one with the lower MU-to-P ratio. 
A) always buy the product with the lower price. 
B) always buy the product with the higher MU. 
C) buy the one with the higher MU-to-P ratio. 
D) buy the one with the lower MU-to-P ratio.

Question 11

Assume that a consumer purchases a combination of products. Product A is an old and reliable product. Product B is a new and appealing product. The MU ₐ /P ₐ = 40 and MU ᵦ /P ᵦ = 45. To maximize utility without spending more money, the consumer should

Accepted Answer

A) purchase less of A and more of B. 
B) purchase more of B and less of A. 
C) purchase more of both A and B. 
D) make no change in A and B. 
A) purchase less of A and more of B. 
B) purchase more of B and less of A. 
C) purchase more of both A and B. 
D) make no change in A and B.

Question 12

Process innovation is represented as a downward shift in a firm's total product curve and its average total cost curve.

Accepted Answer

A) True 
 B)False

Question 13

A legal protection for taking the lead in innovation is

Accepted Answer

A) brand names. 
B) trade secrets. 
C) copyright. 
D) mergers. 
A) brand names. 
B) trade secrets. 
C) copyright. 
D) mergers.

Question 14

Creative destruction may either increase or reduce competition, depending on whether the innovation is done by start-up firms or existing dominant firms.

Accepted Answer

A) True 
 B)False

Question 15

Technological advance may lead to new monopolies and may also destroy existing monopolies.

Accepted Answer

A) True 
 B)False

Question 16

When entrepreneurs use their own personal savings to finance the R&D for their new venture, the marginal cost of financing is zero.

Accepted Answer

A) True 
 B)False

Question 17

Fast-second strategies are more likely to be used by

Accepted Answer

A) dominant firms than by start-up firms. 
B) pure competitors rather than by oligopolists. 
C) start-up firms rather than by existing firms. 
D) entrepreneurs rather than by corporations. 
A) dominant firms than by start-up firms. 
B) pure competitors rather than by oligopolists. 
C) start-up firms rather than by existing firms. 
D) entrepreneurs rather than by corporations.

Question 18

Kara's Kettles, Inc. has developed a new and improved type of cookware. Alex, a typical consumer, will necessarily purchase Kara's new product if his MU/ P for the new cookware exceeds that of competing products.

Accepted Answer

A) True 
 B)False

Question 19

The first commercial introduction of transparent tape is an example of

Accepted Answer

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

Question 20

The retained earnings that corporations often use to finance R&D are also known as

Accepted Answer

A) venture capital. 
B) undistributed profits. 
C) dividends. 
D) mutual funds. 
A) venture capital. 
B) undistributed profits. 
C) dividends. 
D) mutual funds.

Exam 15: Technology, RD, and Efficiency

Technological advance improves productive efficiency by

The discovery of a product or process through the use of imagination, ingenious thinking, and experimentation is

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

A "fast-second strategy" means that a dominant firm in an industry

Suppose that a firm's legal staff concludes that a new production process 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

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

Refer to the data for a consumer whose income = $12. Assume new product Z is introduced. How many units of Z will this consumer buy, given his or her $12 budget?

Many economists view technological advance as mainly a response to profit opportunities arising within a capitalist economy, and not some random external force.

In choosing between an old reliable product and a new attractive product, the consumer will

Assume that a consumer purchases a combination of products. Product A is an old and reliable product. Product B is a new and appealing product. The MU ₐ /P ₐ = 40 and MU ᵦ /P ᵦ = 45. To maximize utility without spending more money, the consumer should

Process innovation is represented as a downward shift in a firm's total product curve and its average total cost curve.

A legal protection for taking the lead in innovation is

Creative destruction may either increase or reduce competition, depending on whether the innovation is done by start-up firms or existing dominant firms.

Technological advance may lead to new monopolies and may also destroy existing monopolies.

When entrepreneurs use their own personal savings to finance the R&D for their new venture, the marginal cost of financing is zero.

Fast-second strategies are more likely to be used by

Kara's Kettles, Inc. has developed a new and improved type of cookware. Alex, a typical consumer, will necessarily purchase Kara's new product if his MU/ P for the new cookware exceeds that of competing products.

The first commercial introduction of transparent tape is an example of

The retained earnings that corporations often use to finance R&D are also known as

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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