Question 1

Firms have several sources of funds to finance their R&D activities, including the following, except

Accepted Answer

A) loans obtained from banks and bondholders. 
B) retained earnings or corporate savings. 
C) venture capital and personal savings. 
D) anticipated profits from forthcoming new products. 
A) loans obtained from banks and bondholders. 
B) retained earnings or corporate savings. 
C) venture capital and personal savings. 
D) anticipated profits from forthcoming new products.

Question 2

Refer to the data for a consumer whose income = $12. Suppose the price of new product Z is $10 rather than $1. This consumer would purchase

Accepted Answer

A) some of Z but less than at a price of $1. 
B) none of Z. 
C) less of X, Y, and Z than if the price were $1. 
D) more of X, Y, and Z than if the price were $1. 
A) some of Z but less than at a price of $1. 
B) none of Z. 
C) less of X, Y, and Z than if the price were $1. 
D) more of X, Y, and Z than if the price were $1.

Question 3

When corporations use retained earnings to finance the R&D for a new venture, the marginal cost of financing is zero.

Accepted Answer

A) True 
 B)False

Question 4

If a firm improves its production method, this change will shift the firm's

Accepted Answer

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

Question 5

Innovation pertains to commercialization, while invention pertains more to scientific research.

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 $4, and the price of good Y is $3. The budget of the consumer is $18. What is the increase in total utility from the original situation when purchasing just X, compared to now when the consumer purchases the utility-maximizing combination of both X and Y?

Accepted Answer

A) 12 
B) 22 
C) 42 
D) 64 
A) 12 
B) 22 
C) 42 
D) 64

Question 7

In the inverted-U theory of R&D, which of the following industry concentration ratios would be most conducive to R&D (as a percentage of firm sales)?

Accepted Answer

A) 1 percent 
B) 10 percent 
C) 50 percent 
D) 70 percent 
A) 1 percent 
B) 10 percent 
C) 50 percent 
D) 70 percent

Question 8

Suppose that Marlen Fisher has legal protection against anyone producing and selling a fishing lure specifically named "MarFish." This legal protection is most likely to be a

Accepted Answer

A) trademark. 
B) restraining order. 
C) patent. 
D) copyright. 
A) trademark. 
B) restraining order. 
C) patent. 
D) copyright.

Question 9

One of the advantages of being first to develop a new product is the opportunity to develop brand-name recognition.

Accepted Answer

A) True 
 B)False

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 changes 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 average total cost?

Accepted Answer

A) ATC decreased by $2.67 
B) ATC increased by $2.67 
C) ATC increased by $3.33 
D) ATC decreased by $3.33 
A) ATC decreased by $2.67 
B) ATC increased by $2.67 
C) ATC increased by $3.33 
D) ATC decreased by $3.33

Question 11

The following can increase the profits of an innovating firm, except

Accepted Answer

A) new product introductions. 
B) existing product improvements. 
C) imitation of its innovation by other firms. 
D) successful process innovations. 
A) new product introductions. 
B) existing product improvements. 
C) imitation of its innovation by other firms. 
D) successful process innovations.

Question 12

"Intrapreneurs" is the term sometimes used to refer to

Accepted Answer

A) entrepreneurs who are initiators and risk bearers. 
B) business people who pool their financial resources to pursue a business idea. 
C) individuals who work as their own bosses. 
D) salaried employees engaged in R&D activities in existing companies. 
A) entrepreneurs who are initiators and risk bearers. 
B) business people who pool their financial resources to pursue a business idea. 
C) individuals who work as their own bosses. 
D) salaried employees engaged in R&D activities in existing companies.

Question 13

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 8 percent. What will be the marginal cost and the marginal benefit of the optimal amount of R&D spending?

Accepted Answer

A) MC = 8 percent; MB = 6 percent 
B) MC = 8 percent; MB = 8 percent 
C) MC = 6 percent; MB = 8 percent 
D) MC = 6 percent; MB = 6 percent 
A) MC = 8 percent; MB = 6 percent 
B) MC = 8 percent; MB = 8 percent 
C) MC = 6 percent; MB = 8 percent 
D) MC = 6 percent; MB = 6 percent

Question 14

Refer to the diagram, which relates to Firm X. Which of the following would illustrate process innovation by X?

Accepted Answer

A) a downward shift in the total product curve from TP₁ to TP₂ 
B) an upward shift in the total product curve from TP₂ to TP₁ 
C) a move from a to b on TP₁ 
D) a move from c to d on TP₂ 
A) a downward shift in the total product curve from TP₁ to TP₂ 
B) an upward shift in the total product curve from TP₂ to TP₁ 
C) a move from a to b on TP₁ 
D) a move from c to d on TP₂

Question 15

Entrepreneurs

Accepted Answer

A) work exclusively in government and university R&D laboratories. 
B) often form small companies called start-ups. 
C) are less likely to exist in service industries than in manufacturing industries. 
D) are engaged mainly in basic scientific research. 
A) work exclusively in government and university R&D laboratories. 
B) often form small companies called start-ups. 
C) are less likely to exist in service industries than in manufacturing industries. 
D) are engaged mainly in basic scientific research.

Question 16

The introduction of the iPhone by Apple is an example of a(n)

Accepted Answer

A) invention. 
B) innovation. 
C) diffusion. 
D) infusion. 
A) invention. 
B) innovation. 
C) diffusion. 
D) infusion.

Question 17

As it relates to the R&D decision, the interest-rate cost-of-funds curve

Accepted Answer

A) usually slopes downward. 
B) is the marginal cost element in the MB = MC decision framework. 
C) indicates a constant rate of return, r. 
D) reflects the interest rate on bank loans but not the implicit interest rate on the use of retained earnings. 
A) usually slopes downward. 
B) is the marginal cost element in the MB = MC decision framework. 
C) indicates a constant rate of return, r. 
D) reflects the interest rate on bank loans but not the implicit interest rate on the use of retained earnings.

Question 18

A major source of funding of R&D in large, established corporations is

Accepted Answer

A) venture capital. 
B) dividends. 
C) mutual funds. 
D) retained earnings. 
A) venture capital. 
B) dividends. 
C) mutual funds. 
D) retained earnings.

Question 19

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. When the consumer purchases the utility-maximizing combination of old product X and new product Y, total utility will be

Accepted Answer

A) 62. 
B) 78. 
C) 70. 
D) 82. 
A) 62. 
B) 78. 
C) 70. 
D) 82.

Question 20

The following are examples of innovative products in their respective industries, except

Accepted Answer

A) Nokia's smartphones. 
B) Johnson & Johnson's disposable contact lenses. 
C) Hewlett-Packard's scientific calculator. 
D) Apple's iPhone. 
A) Nokia's smartphones. 
B) Johnson & Johnson's disposable contact lenses. 
C) Hewlett-Packard's scientific calculator. 
D) Apple's iPhone.

Exam 15: Technology, RD, and Efficiency

Firms have several sources of funds to finance their R&D activities, including the following, except

Refer to the data for a consumer whose income = $12. Suppose the price of new product Z is $10 rather than $1. This consumer would purchase

When corporations use retained earnings to finance the R&D for a new venture, the marginal cost of financing is zero.

If a firm improves its production method, this change will shift the firm's

Innovation pertains to commercialization, while invention pertains more to scientific research.

In the inverted-U theory of R&D, which of the following industry concentration ratios would be most conducive to R&D (as a percentage of firm sales)?

Suppose that Marlen Fisher has legal protection against anyone producing and selling a fishing lure specifically named "MarFish." This legal protection is most likely to be a

One of the advantages of being first to develop a new product is the opportunity to develop brand-name recognition.

The following can increase the profits of an innovating firm, except

"Intrapreneurs" is the term sometimes used to refer to

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 8 percent. What will be the marginal cost and the marginal benefit of the optimal amount of R&D spending?

Refer to the diagram, which relates to Firm X. Which of the following would illustrate process innovation by X?

Entrepreneurs

The introduction of the iPhone by Apple is an example of a(n)

As it relates to the R&D decision, the interest-rate cost-of-funds curve

A major source of funding of R&D in large, established corporations is

The following are examples of innovative products in their respective industries, except

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