Question 1

Which of the following supports the contention that monopolistic competitors have a strong incentive to engage in R&D?

Accepted Answer

A) Entry to monopolistic competitive industries is relatively easy, and thus profit from innovation is quickly competed away. 
B) Most monopolistic competitive industries are decreasing-cost industries. 
C) The desire to differentiate products from competitors may motivate monopolistic competitors to engage in R&D. 
D) Monopolistic competitors have large retained earnings that are available to finance R&D. 
A) Entry to monopolistic competitive industries is relatively easy, and thus profit from innovation is quickly competed away. 
B) Most monopolistic competitive industries are decreasing-cost industries. 
C) The desire to differentiate products from competitors may motivate monopolistic competitors to engage in R&D. 
D) Monopolistic competitors have large retained earnings that are available to finance R&D.

Question 2

Which would be an example of innovation within an existing business firm?

Accepted Answer

A) the development of Post-it note pads by the 3M Corporation 
B) the granting of a patent to a university researcher 
C) the formation of the start-up firm Amgen 
D) the merger of AOL and Time-Warner 
A) the development of Post-it note pads by the 3M Corporation 
B) the granting of a patent to a university researcher 
C) the formation of the start-up firm Amgen 
D) the merger of AOL and Time-Warner

Question 3

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

Accepted Answer

A) not undertake the R&D expenditure if its interest-rate cost of borrowing is 8 percent. 
B) undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent. 
C) undertake the R&D expenditure if its interest-rate cost of borrowing is 20 percent. 
D) undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent. 
A) not undertake the R&D expenditure if its interest-rate cost of borrowing is 8 percent. 
B) undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent. 
C) undertake the R&D expenditure if its interest-rate cost of borrowing is 20 percent. 
D) undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent.

Question 4

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC ₁ to ATC ₂?

Accepted Answer

A) an increase in the price of a key component used by A in producing its product 
B) a decrease in the incomes of A's customers 
C) a move along A's total product curve (not shown) 
D) an improved production method that shifts A's total product curve upward 
A) an increase in the price of a key component used by A in producing its product 
B) a decrease in the incomes of A's customers 
C) a move along A's total product curve (not shown) 
D) an improved production method that shifts A's total product curve upward

Question 5

Refer to the data for a consumer whose income = $14. Suppose the price of new product Z is $2 rather than $1. This consumer would purchase

Accepted Answer

A) four units of Z. 
B) three units of Z. 
C) six units of Z. 
D) more of X, Y, and Z than if the price were $1 for Z. 
A) four units of Z. 
B) three units of Z. 
C) six units of Z. 
D) more of X, Y, and Z than if the price were $1 for Z.

Question 6

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 7 percent. What is the optimal amount of R&D expenditures?

Accepted Answer

A) $30 billion 
B) $42 billion 
C) $36 billion 
D) $48 billion 
A) $30 billion 
B) $42 billion 
C) $36 billion 
D) $48 billion

Question 7

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

Accepted Answer

A) True 
 B)False

Question 8

The following are examples of technological breakthroughs that came out of a government or university laboratory, except

Accepted Answer

A) the Internet. 
B) genetic engineering. 
C) hybrid seeds. 
D) disposable contact lenses. 
A) the Internet. 
B) genetic engineering. 
C) hybrid seeds. 
D) disposable contact lenses.

Question 9

If we plotted the given data on a graph with R&D expenditures on the horizontal axis, the

Accepted Answer

A) interest-rate cost-of-funds curve would be a vertical line. 
B) interest-rate cost-of-funds curve would be a horizontal line. 
C) expected-rate-of-return curve would slope upward. 
D) expected-rate-of-return curve would be a horizontal line. 
A) interest-rate cost-of-funds curve would be a vertical line. 
B) interest-rate cost-of-funds curve would be a horizontal line. 
C) expected-rate-of-return curve would slope upward. 
D) expected-rate-of-return curve would be a horizontal line.

Which of the following supports the contention that monopolistic competitors have a strong incentive to engage in R&D?

Which would be an example of innovation within an existing business firm?

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC ₁ to ATC ₂?

Refer to the data for a consumer whose income = $14. Suppose the price of new product Z is $2 rather than $1. This consumer would purchase

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 7 percent. What is the optimal amount of R&D expenditures?

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

The following are examples of technological breakthroughs that came out of a government or university laboratory, except

If we plotted the given data on a graph with R&D expenditures on the horizontal axis, the

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

Exam 15: Technology, RD, and Efficiency

Which of the following supports the contention that monopolistic competitors have a strong incentive to engage in R&D?

Which would be an example of innovation within an existing business firm?

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC ₁ to ATC ₂?

Refer to the data for a consumer whose income = $14. Suppose the price of new product Z is $2 rather than $1. This consumer would purchase

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 7 percent. What is the optimal amount of R&D expenditures?

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

The following are examples of technological breakthroughs that came out of a government or university laboratory, except

If we plotted the given data on a graph with R&D expenditures on the horizontal axis, the

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