Question 1

Discuss how technological advance can increase revenues with new product demand.

Accepted Answer

To maximize their satisfaction, consumer

Question 2

In business, the abbreviation "R&D" refers to recreation and discovery.

Accepted Answer

A) True 
 B)False

Question 3

If an R&D activity is affordable, the firm should spend on that activity.

Accepted Answer

A) True 
 B)False

Question 4

The spread of an innovation to other products through imitation is called

Accepted Answer

A) invention. 
B) development. 
C) diffusion. 
D) applied research. 
A) invention. 
B) development. 
C) diffusion. 
D) applied research.

Question 5

The U.S. government has been increasing the portion of its budget and its spending on R&D activities, for the nation's long-term growth.

Accepted Answer

A) True 
 B)False

Question 6

The table shows the marginal utility schedules for old product X and new product Y for a hypothetical consumer. The price of X is $2, and the price of good Y is $1. The budget of the consumer is $10. If the consumer buys both old product X and new product Y, how much will the consumer buy of each to maximize utility?

Accepted Answer

A) 2X and 3Y 
B) 3X and 4Y 
C) 4X and 3Y 
D) 4X and 2Y 
A) 2X and 3Y 
B) 3X and 4Y 
C) 4X and 3Y 
D) 4X and 2Y

Question 7

Process innovation raises the firm's total product curve and lowers its average total cost curve.

Accepted Answer

A) True 
 B)False

Question 8

What idea is best illustrated by the example of Alamo auto rentals offering unlimited mileage to drivers and the practice being adopted by other auto rental firms?

Accepted Answer

A) start-ups 
B) diffusion 
C) invention 
D) fast-second strategy 
A) start-ups 
B) diffusion 
C) invention 
D) fast-second strategy

Question 9

The table shows the expected rate of return, R&D spending, and interest-rate cost-of-funds for a hypothetical firm. Based on the information given, the optimal amount of R&D spending would be

Accepted Answer

A) $45 million. 
B) $65 million. 
C) $55 million. 
D) $75 million. 
A) $45 million. 
B) $65 million. 
C) $55 million. 
D) $75 million.

Question 10

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. Originally the firm produced 2,000 units of output by combining its fixed capital with 200 units of labor and 500 units of raw materials. Now the firm improves its production process so that it can produce 3,000 units of output by combining its fixed capital with 100 units of labor and 500 units of raw materials. What happened to total cost?

Accepted Answer

A) TC increased by $2,000 
B) TC decreased by $2,000 
C) TC decreased by $4,000 
D) TC remained unchanged 
A) TC increased by $2,000 
B) TC decreased by $2,000 
C) TC decreased by $4,000 
D) TC remained unchanged

Question 11

Kodak introduced to the marketplace a digital camera that uses no film but takes photos that can be shown on personal computers. This is an example of

Accepted Answer

A) economies of scale. 
B) product innovation. 
C) process innovation. 
D) venture capital. 
A) economies of scale. 
B) product innovation. 
C) process innovation. 
D) venture capital.

Question 12

Inventions and innovations can both be patented.

Accepted Answer

A) True 
 B)False

Question 13

The inverted-U theory of R&D suggests that more R&D spending will be done by oligopolists than by firms producing in the other market structures.

Accepted Answer

A) True 
 B)False

Question 14

The table shows the marginal utility schedules for old product X and new product Y for a hypothetical consumer. The price of X is $3, and the price of good Y is $2. The budget of the consumer is $15. If the consumer buys both old product X and new product Y, how much will the consumer buy of each to maximize utility?

Accepted Answer

A) 3X and 4Y 
B) 3X and 3Y 
C) 4X and 3Y 
D) 4X and 4Y 
A) 3X and 4Y 
B) 3X and 3Y 
C) 4X and 3Y 
D) 4X and 4Y

Question 15

Process innovation will shift a firm's

Accepted Answer

A) total product curve upward. 
B) total product curve downward. 
C) marginal product curve downward. 
D) marginal cost curve upward. 
A) total product curve upward. 
B) total product curve downward. 
C) marginal product curve downward. 
D) marginal cost curve upward.

Question 16

Entrepreneurs and innovative firms with past successes in developing products

Accepted Answer

A) have less access to resources for further innovation. 
B) have more access to resources for further innovation. 
C) will often turn to the government to fund the next venture. 
D) will often turn to international investors to fund the next venture. 
A) have less access to resources for further innovation. 
B) have more access to resources for further innovation. 
C) will often turn to the government to fund the next venture. 
D) will often turn to international investors to fund the next venture.

Question 17

Compare and contrast the modern view of technological advance with the traditional view.

Accepted Answer

The traditional view of technological ad

Question 18

How does innovation differ from invention and diffusion?

Accepted Answer

Innovation draws directly on invention.

Question 19

Why is the percentage of business research and development spending for basic research so small?

Accepted Answer

A) Basic research is the sole responsibility of university research labs. 
B) Scientific knowledge has minimal effect on technological advance. 
C) Scientific principles cannot be easily patented or commercialized. 
D) Basic research is confusing and not well understood by business executives. 
A) Basic research is the sole responsibility of university research labs. 
B) Scientific knowledge has minimal effect on technological advance. 
C) Scientific principles cannot be easily patented or commercialized. 
D) Basic research is confusing and not well understood by business executives.

Question 20

Economists who contend that oligopolists have a strong incentive to engage in R&D say that

Accepted Answer

A) the undistributed profits of oligopolists give them a source of readily available, relatively low-cost funds for financing R&D. 
B) entry barriers enable oligopolists to sustain the profit they gain from innovation. 
C) the large size of oligopolists' R&D departments allows them to use specialized, expensive R&D equipment and employ teams of specialized researchers. 
D) all of the other answers are true. 
A) the undistributed profits of oligopolists give them a source of readily available, relatively low-cost funds for financing R&D. 
B) entry barriers enable oligopolists to sustain the profit they gain from innovation. 
C) the large size of oligopolists' R&D departments allows them to use specialized, expensive R&D equipment and employ teams of specialized researchers. 
D) all of the other answers are true.

Exam 15: Technology, RD, and Efficiency

Discuss how technological advance can increase revenues with new product demand.

In business, the abbreviation "R&D" refers to recreation and discovery.

If an R&D activity is affordable, the firm should spend on that activity.

The spread of an innovation to other products through imitation is called

The U.S. government has been increasing the portion of its budget and its spending on R&D activities, for the nation's long-term growth.

Process innovation raises the firm's total product curve and lowers its average total cost curve.

What idea is best illustrated by the example of Alamo auto rentals offering unlimited mileage to drivers and the practice being adopted by other auto rental firms?

The table shows the expected rate of return, R&D spending, and interest-rate cost-of-funds for a hypothetical firm. Based on the information given, the optimal amount of R&D spending would be

Kodak introduced to the marketplace a digital camera that uses no film but takes photos that can be shown on personal computers. This is an example of

Inventions and innovations can both be patented.

The inverted-U theory of R&D suggests that more R&D spending will be done by oligopolists than by firms producing in the other market structures.

Process innovation will shift a firm's

Entrepreneurs and innovative firms with past successes in developing products

Compare and contrast the modern view of technological advance with the traditional view.

How does innovation differ from invention and diffusion?

Why is the percentage of business research and development spending for basic research so small?

Economists who contend that oligopolists have a strong incentive to engage in R&D say that

Limits, Alternatives, and Choices

The Market System and the Circular Flow

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