Question 1

U.S. business firms channel a majority of their R&D expenditures to scientific research.

Accepted Answer

A) True 
 B)False

Question 2

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

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 24 percent. 
C) upsloping line within the range 8 to 24 percent. 
D) downsloping line within the range 24 to 8 percent. 
A) upsloping line within the range $35M to $75M. 
B) horizontal line at 24 percent. 
C) upsloping line within the range 8 to 24 percent. 
D) downsloping line within the range 24 to 8 percent.

Question 4

Firm ABC designs and implements a lower-cost method of producing its product. This is an example of

Accepted Answer

A) product innovation. 
B) the inverted U-theory. 
C) economies of scale. 
D) process innovation. 
A) product innovation. 
B) the inverted U-theory. 
C) economies of scale. 
D) process innovation.

Question 5

The legal protection for publishers of books, computer software, movies, videos, and musical compositions from having their works used or copied by others without their permission is a

Accepted Answer

A) patent. 
B) copyright. 
C) brand name. 
D) trademark. 
A) patent. 
B) copyright. 
C) brand name. 
D) trademark.

Question 6

The traditional view of technological advance was that it

Accepted Answer

A) was a random external force to which the economy adjusted. 
B) arose largely from advances in military-related research. 
C) was the result of capitalism and the rivalry among firms. 
D) arose from international trade and the sharing of ideas among nations. 
A) was a random external force to which the economy adjusted. 
B) arose largely from advances in military-related research. 
C) was the result of capitalism and the rivalry among firms. 
D) arose from international trade and the sharing of ideas among nations.

Question 7

How does technological advance enhance economic efficiency? Distinguish between its effects on productive efficiency and allocative efficiency.

Accepted Answer

Technological advance contributes signif

Question 8

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

Accepted Answer

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

Question 9

Imitation by rivals is one factor that hinders the diffusion of technological advances.

Accepted Answer

A) True 
 B)False

Question 10

Under which market structure are profit rewards most likely to be quickly taken away by existing firms or new firms entering the industry?

Accepted Answer

A) oligopoly 
B) pure monopoly 
C) pure competition 
D) monopolistic competition 
A) oligopoly 
B) pure monopoly 
C) pure competition 
D) monopolistic competition

Question 11

A firm's marginal benefit from its R&D expenditures is the

Accepted Answer

A) total amount spent on its R&D activities. 
B) expected profit from the last dollar spent on R&D. 
C) employment generated by the largest R&D project. 
D) resources bought for all of its R&D activities. 
A) total amount spent on its R&D activities. 
B) expected profit from the last dollar spent on R&D. 
C) employment generated by the largest R&D project. 
D) resources bought for all of its R&D activities.

Question 12

In the United States, research and development spending as a percentage of GDP is

Accepted Answer

A) 1.5 to 2.0 percent, which is lower than many other industrial countries. 
B) 2.5 to 3.0 percent, which is higher than many other industrial countries. 
C) 4.5 to 5.0 percent, which is lower than many other industrial countries. 
D) 5.5 to 6.0 percent, which is higher than many other industrial countries. 
A) 1.5 to 2.0 percent, which is lower than many other industrial countries. 
B) 2.5 to 3.0 percent, which is higher than many other industrial countries. 
C) 4.5 to 5.0 percent, which is lower than many other industrial countries. 
D) 5.5 to 6.0 percent, which is higher than many other industrial countries.

Question 13

We know with certainty that a consumer will buy a newly introduced product rather than an existing product when the

Accepted Answer

A) MU/ P of the new product exceeds the MU/ P of the existing product. 
B) price of the new product is less than the price of the existing product. 
C) MU of the new product is more than the MU of the existing product. 
D) law of diminishing marginal utility applies to the existing product. 
A) MU/ P of the new product exceeds the MU/ P of the existing product. 
B) price of the new product is less than the price of the existing product. 
C) MU of the new product is more than the MU of the existing product. 
D) law of diminishing marginal utility applies to the existing product.

Question 14

Suppose a firm anticipates that a particular R&D expenditure of $100 million will result in a new product and thus create a one-time added profit of $108 million a year later. The firm will

Accepted Answer

A) undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent. 
B) undertake the R&D expenditure if its interest-rate cost of borrowing is 10 percent. 
C) not undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent. 
D) not undertake the R&D expenditure if its interest-rate cost of borrowing is 7 percent. 
A) undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent. 
B) undertake the R&D expenditure if its interest-rate cost of borrowing is 10 percent. 
C) not undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent. 
D) not undertake the R&D expenditure if its interest-rate cost of borrowing is 7 percent.

Question 15

The technical and scientific characteristics of an industry may be less important than its structure in determining R&D spending and innovation.

Accepted Answer

A) True 
 B)False

Question 16

Other things equal, the prospect of imitation by others

Accepted Answer

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

Question 17

Broadly defined, technological advance

Accepted Answer

A) can occur in the short run, long run, or very long run. 
B) comprises new and improved goods and services and/or new and improved ways of producing or distributing them. 
C) includes invention but not innovation or diffusion. 
D) includes product innovation but not process innovation. 
A) can occur in the short run, long run, or very long run. 
B) comprises new and improved goods and services and/or new and improved ways of producing or distributing them. 
C) includes invention but not innovation or diffusion. 
D) includes product innovation but not process innovation.

Question 18

Funds lent to start-up firms in return for shares of the profit if the firms succeed are called

Accepted Answer

A) retained earnings. 
B) time deposits. 
C) venture capital. 
D) transfer payments. 
A) retained earnings. 
B) time deposits. 
C) venture capital. 
D) transfer payments.

Question 19

R&D activities by government and universities have not been an important factor in fostering technological advance.

Accepted Answer

A) True 
 B)False

Question 20

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

Exam 15: Technology, RD, and Efficiency

U.S. business firms channel a majority of their R&D expenditures to scientific research.

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

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)

Firm ABC designs and implements a lower-cost method of producing its product. This is an example of

The legal protection for publishers of books, computer software, movies, videos, and musical compositions from having their works used or copied by others without their permission is a

The traditional view of technological advance was that it

How does technological advance enhance economic efficiency? Distinguish between its effects on productive efficiency and allocative efficiency.

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

Imitation by rivals is one factor that hinders the diffusion of technological advances.

Under which market structure are profit rewards most likely to be quickly taken away by existing firms or new firms entering the industry?

A firm's marginal benefit from its R&D expenditures is the

In the United States, research and development spending as a percentage of GDP is

We know with certainty that a consumer will buy a newly introduced product rather than an existing product when the

Suppose a firm anticipates that a particular R&D expenditure of $100 million will result in a new product and thus create a one-time added profit of $108 million a year later. The firm will

The technical and scientific characteristics of an industry may be less important than its structure in determining R&D spending and innovation.

Other things equal, the prospect of imitation by others

Broadly defined, technological advance

Funds lent to start-up firms in return for shares of the profit if the firms succeed are called

R&D activities by government and universities have not been an important factor in fostering technological advance.

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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