Question 1

In economists' models, technological advance occurs in

Accepted Answer

A) the very long run. 
B) either the short run, long run, or very long run. 
C) manufacturing industries but not in service industries. 
D) pure competition but not in monopolistic competition, oligopoly, and pure monopoly. 
A) the very long run. 
B) either the short run, long run, or very long run. 
C) manufacturing industries but not in service industries. 
D) pure competition but not in monopolistic competition, oligopoly, and pure monopoly.

Question 2

Which pair of market structures provides firms with the greatest ability to finance R&D out of retained earnings?

Accepted Answer

A) oligopolists and pure monopolists 
B) pure competitors and pure monopolists 
C) pure competitors and monopolistic competitors 
D) monopolistic competitors and pure monopolists 
A) oligopolists and pure monopolists 
B) pure competitors and pure monopolists 
C) pure competitors and monopolistic competitors 
D) monopolistic competitors and pure monopolists

Question 3

Entrepreneurs often form new small firms called "spin-off firms."

Accepted Answer

A) True 
 B)False

Question 4

In the graph, the optimal amount of R&D spending and the interest-rate cost-of-funds at that optimal level would be, respectively,

Accepted Answer

A) $10 million and 9 percent. 
B) $10 million and 13 percent. 
C) $30 million and 9 percent. 
D) $50 million and 6 percent. 
A) $10 million and 9 percent. 
B) $10 million and 13 percent. 
C) $30 million and 9 percent. 
D) $50 million and 6 percent.

Question 5

Creative destruction is

Accepted Answer

A) the process by which large firms buy up small firms. 
B) the process by which new firms and new products replace existing dominant firms and products. 
C) a term coined many years ago by Adam Smith. 
D) applicable to planned economies but not to market economies. 
A) the process by which large firms buy up small firms. 
B) the process by which new firms and new products replace existing dominant firms and products. 
C) a term coined many years ago by Adam Smith. 
D) applicable to planned economies but not to market economies.

Question 6

An industry with which of the following four-firm concentration ratios would tend to have the greatest amount of R&D expenditures as a percentage of sales?

Accepted Answer

A) 0 
B) 10 
C) 50 
D) 100 
A) 0 
B) 10 
C) 50 
D) 100

Question 7

Refer to the data for a consumer whose income = $12. In equilibrium, the introduction of new product Z has increased this consumer's total utility by

Accepted Answer

A) 54 utils. 
B) 42 utils. 
C) 60 utils. 
D) 66 utils. 
A) 54 utils. 
B) 42 utils. 
C) 60 utils. 
D) 66 utils.

Question 8

List and describe the two types of innovation.

Accepted Answer

There are two types of innovation, produ

Question 9

Legal protections against competitors producing and selling a product identical to the one you invented are called _________; legal protections against competitors using your product's name are called __________.

Accepted Answer

A) patents; trademarks 
B) trademarks; copyrights 
C) copyrights; patents 
D) trademarks; patents 
A) patents; trademarks 
B) trademarks; copyrights 
C) copyrights; patents 
D) trademarks; patents

Question 10

Suppose that a firm successfully introduces a highly profitable new product. If this new product is priced higher than existing substitute products, then the

Accepted Answer

A) new product has greater marginal utility than the existing products. 
B) laws of economics have been violated. 
C) new product must have increasing, not diminishing, marginal utility. 
D) existing products were unprofitable to produce. 
A) new product has greater marginal utility than the existing products. 
B) laws of economics have been violated. 
C) new product must have increasing, not diminishing, marginal utility. 
D) existing products were unprofitable to produce.

Question 11

In exchange for a share of ZYX's profits if it succeeds, Firm ABC provides development funds to newly formed ZYX, which is developing an innovative product. ABC funds are called ____________, while ZYX is known as a ____________.

Accepted Answer

A) venture capital; start-up 
B) retained earnings; entrepreneurial firm 
C) mutual funds; start-up 
D) transfer payments; entrepreneurial firm 
A) venture capital; start-up 
B) retained earnings; entrepreneurial firm 
C) mutual funds; start-up 
D) transfer payments; entrepreneurial firm

Question 12

Refer to the data for a consumer whose income = $6. In equilibrium, the introduction of new product Z has increased this consumer's total utility by

Accepted Answer

A) 24 utils. 
B) 98 utils. 
C) 74 utils. 
D) 14 utils. 
A) 24 utils. 
B) 98 utils. 
C) 74 utils. 
D) 14 utils.

Question 13

Refer to the diagram. Process innovation will tend to

Accepted Answer

A) shift ATC1 to ATC2. 
B) shift ATC2 to ATC1. 
C) change output from Q1 to Q2. 
D) change output from Q2 to Q1. 
A) shift ATC1 to ATC2. 
B) shift ATC2 to ATC1. 
C) change output from Q1 to Q2. 
D) change output from Q2 to Q1.

Question 14

Do economists believe that patents should be eliminated on some types of products? Explain.

Accepted Answer

Yes, some economists believe the net ben

Question 15

Refer to the data. At $40 million of R&D expenditures, the

Accepted Answer

A) marginal cost of R&D exceeds the marginal benefit. 
B) marginal benefit of R&D exceeds the marginal cost. 
C) expected rate of return from R&D is negative. 
D) firm has exceeded its affordable level of R&D. 
A) marginal cost of R&D exceeds the marginal benefit. 
B) marginal benefit of R&D exceeds the marginal cost. 
C) expected rate of return from R&D is negative. 
D) firm has exceeded its affordable level of R&D.

Question 16

The conjecture that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall as industry concentration rises is known as the

Accepted Answer

A) inverted-U theory of R&D. 
B) average product of R&D theory. 
C) bell-shaped-curve theory of product innovation. 
D) theory of increasing and diminishing returns. 
A) inverted-U theory of R&D. 
B) average product of R&D theory. 
C) bell-shaped-curve theory of product innovation. 
D) theory of increasing and diminishing returns.

Question 17

Process innovation causes an upward shift in a firm's total product curve and

Accepted Answer

A) a decrease in its average product. 
B) a downward shift in its average total cost curve. 
C) an upward shift in its average total cost curve. 
D) an upward shift in its marginal revenue curve. 
A) a decrease in its average product. 
B) a downward shift in its average total cost curve. 
C) an upward shift in its average total cost curve. 
D) an upward shift in its marginal revenue curve.

Question 18

Which of the following is a "spin-off" firm?

Accepted Answer

A) Amazon 
B) Yum! Brands 
C) McDonald's 
D) Pepsi 
A) Amazon 
B) Yum! Brands 
C) McDonald's 
D) Pepsi

Question 19

The process by which new firms and new products replace existing dominant firms and products is called

Accepted Answer

A) monopolistic competition. 
B) the inverted-U process. 
C) process innovation. 
D) creative destruction. 
A) monopolistic competition. 
B) the inverted-U process. 
C) process innovation. 
D) creative destruction.

Question 20

Which of the following does not aptly describe innovation?

Accepted Answer

A) first commercial use of a new production process 
B) discovery of a new production method 
C) creation of a new form of business enterprise 
D) commercial introduction of a new product 
A) first commercial use of a new production process 
B) discovery of a new production method 
C) creation of a new form of business enterprise 
D) commercial introduction of a new product

Exam 15: Technology, RD, and Efficiency

In economists' models, technological advance occurs in

Which pair of market structures provides firms with the greatest ability to finance R&D out of retained earnings?

Entrepreneurs often form new small firms called "spin-off firms."

In the graph, the optimal amount of R&D spending and the interest-rate cost-of-funds at that optimal level would be, respectively,

Creative destruction is

An industry with which of the following four-firm concentration ratios would tend to have the greatest amount of R&D expenditures as a percentage of sales?

Refer to the data for a consumer whose income = $12. In equilibrium, the introduction of new product Z has increased this consumer's total utility by

List and describe the two types of innovation.

Legal protections against competitors producing and selling a product identical to the one you invented are called _________; legal protections against competitors using your product's name are called __________.

Suppose that a firm successfully introduces a highly profitable new product. If this new product is priced higher than existing substitute products, then the

In exchange for a share of ZYX's profits if it succeeds, Firm ABC provides development funds to newly formed ZYX, which is developing an innovative product. ABC funds are called ____________, while ZYX is known as a ____________.

Refer to the data for a consumer whose income = $6. In equilibrium, the introduction of new product Z has increased this consumer's total utility by

Refer to the diagram. Process innovation will tend to

Do economists believe that patents should be eliminated on some types of products? Explain.

Refer to the data. At $40 million of R&D expenditures, the

The conjecture that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall as industry concentration rises is known as the

Process innovation causes an upward shift in a firm's total product curve and

Which of the following is a "spin-off" firm?

The process by which new firms and new products replace existing dominant firms and products is called

Which of the following does not aptly describe innovation?

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

Filters

Legal protections against competitors producing and selling a product identical to the one you invented are called _; legal protections against competitors using your product's name are called __.

In exchange for a share of ZYX's profits if it succeeds, Firm ABC provides development funds to newly formed ZYX, which is developing an innovative product. ABC funds are called , while ZYX is known as a .