Question 1

Which of the following statements is most accurate about business R&D spending in the United States?

Accepted Answer

A) It is more or less equally distributed between innovation, invention, and basic research. 
B) Well over half is dedicated to innovation and imitation. 
C) The largest share is for basic research, as it provides the foundation, followed by invention and then innovation. 
D) The majority is spent on applied research. 
A) It is more or less equally distributed between innovation, invention, and basic research. 
B) Well over half is dedicated to innovation and imitation. 
C) The largest share is for basic research, as it provides the foundation, followed by invention and then innovation. 
D) The majority is spent on applied research.

Question 2

The modern view of technological advance is that it

Accepted Answer

A) is rooted in the independent advance of science, an element largely external to the market system. 
B) is rarely carried out by oligopolists or pure monopolists. 
C) is an internal element of capitalism, occurring in response to profit incentives. 
D) necessarily destroys existing monopoly power. 
A) is rooted in the independent advance of science, an element largely external to the market system. 
B) is rarely carried out by oligopolists or pure monopolists. 
C) is an internal element of capitalism, occurring in response to profit incentives. 
D) necessarily destroys existing monopoly power.

Question 3

Technological advance is a three-step process involving

Accepted Answer

A) invention, duplication, and diffusion. 
B) duplication, innovation, and diversity. 
C) invention, innovation, and diffusion. 
D) necessity, invention, and solution. 
A) invention, duplication, and diffusion. 
B) duplication, innovation, and diversity. 
C) invention, innovation, and diffusion. 
D) necessity, invention, and solution.

Question 4

Product innovation contributes to technological advance primarily by

Accepted Answer

A) decreasing allocative efficiency. 
B) increasing allocative efficiency. 
C) decreasing productive efficiency. 
D) increasing productive efficiency. 
A) decreasing allocative efficiency. 
B) increasing allocative efficiency. 
C) decreasing productive efficiency. 
D) increasing productive efficiency.

Question 5

What are the differences between the short run, long run, and very long run?

Accepted Answer

In the short run, technology and plant a

Question 6

One of the major advantages of being the first to develop a product is

Accepted Answer

A) an increase in the average total cost of production. 
B) less need for legal protection for the product. 
C) the opportunity to be bought out for a profit. 
D) the ability to use the fast-second strategy. 
A) an increase in the average total cost of production. 
B) less need for legal protection for the product. 
C) the opportunity to be bought out for a profit. 
D) the ability to use the fast-second strategy.

Question 7

Which of the following firms was not a "start-up"?

Accepted Answer

A) Google 
B) Starbucks 
C) Apple 
D) PayPal 
A) Google 
B) Starbucks 
C) Apple 
D) PayPal

Question 8

A firm's optimal amount of R&D occurs where the interest-rate cost of funds and the expected rate of return are equal.

Accepted Answer

A) True 
 B)False

Question 9

Which among the following is the strongest determinant of an industry's technological progressiveness?

Accepted Answer

A) the scientific character of its industry and the number of technological opportunities available 
B) the size of the industry concentration ratio-the lower the ratio, the greater the firm's technological progressiveness 
C) the Herfindahl index in the firm's industry-the higher the index value, the greater the firm's technological progressiveness 
D) the amount of retained earnings in the industry 
A) the scientific character of its industry and the number of technological opportunities available 
B) the size of the industry concentration ratio-the lower the ratio, the greater the firm's technological progressiveness 
C) the Herfindahl index in the firm's industry-the higher the index value, the greater the firm's technological progressiveness 
D) the amount of retained earnings in the industry

Question 10

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 9 percent. What will be the marginal cost and the marginal benefit of the optimal amount of R&D spending?

Accepted Answer

A) MC = 5 percent; MB = 9 percent 
B) MC = 9 percent; MB = 9 percent 
C) MC = 9 percent; MB = 13 percent 
D) MC = 5 percent; MB = 5 percent 
A) MC = 5 percent; MB = 9 percent 
B) MC = 9 percent; MB = 9 percent 
C) MC = 9 percent; MB = 13 percent 
D) MC = 5 percent; MB = 5 percent

Question 11

In 2016, about ____ percent of U.S. business R&D spending was for basic research.

Accepted Answer

A) 1 
B) 6 
C) 15 
D) 79 
A) 1 
B) 6 
C) 15 
D) 79

Question 12

Which market structure has a strong incentive for product development and differentiation?

Accepted Answer

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

Question 13

Which of the following would be the best example of a "start-up"?

Accepted Answer

A) the formation of Imation by the 3Com Corporation 
B) the founding of Apple by Jobs and Wozniak 
C) the buyout of McCaw Communications by AT&T 
D) the sale of a license by IBM to Dell computers 
A) the formation of Imation by the 3Com Corporation 
B) the founding of Apple by Jobs and Wozniak 
C) the buyout of McCaw Communications by AT&T 
D) the sale of a license by IBM to Dell computers

Question 14

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 slope downward. 
C) expected-rate-of-return curve would slope downward. 
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 slope downward. 
C) expected-rate-of-return curve would slope downward. 
D) expected-rate-of-return curve would be a horizontal line.

Question 15

Technological advance is shown as a(n)

Accepted Answer

A) movement from a point inside a production possibilities curve to a point on the curve. 
B) movement along a production possibilities curve. 
C) outward shift of a production possibilities curve. 
D) inward shift of a production possibilities curve. 
A) movement from a point inside a production possibilities curve to a point on the curve. 
B) movement along a production possibilities curve. 
C) outward shift of a production possibilities curve. 
D) inward shift of a production possibilities curve.

Question 16

Which of the following statements about technological advance is not true?

Accepted Answer

A) It enhances both productive and allocative efficiency in the society. 
B) It can increase monopoly power through, for example, patents. 
C) It can eventually destroy old existing monopolies. 
D) It progresses automatically and inevitably. 
A) It enhances both productive and allocative efficiency in the society. 
B) It can increase monopoly power through, for example, patents. 
C) It can eventually destroy old existing monopolies. 
D) It progresses automatically and inevitably.

Question 17

Technological advance increases productive efficiency by giving society a more preferred mix of goods.

Accepted Answer

A) True 
 B)False

Question 18

Joseph Schumpeter viewed capitalism as a process of "creative destruction" because

Accepted Answer

A) profitable firms are bought out by larger firms. 
B) capitalism would create wealth, but government would destroy it. 
C) the creation of new products would destroy the market for existing products. 
D) invention is a creative process, but most ideas are destroyed when entrepreneurs develop and market products. 
A) profitable firms are bought out by larger firms. 
B) capitalism would create wealth, but government would destroy it. 
C) the creation of new products would destroy the market for existing products. 
D) invention is a creative process, but most ideas are destroyed when entrepreneurs develop and market products.

Question 19

Factors that help firms who invent and innovate deal with the "imitation problem" include all of the following, except

Accepted Answer

A) patents. 
B) copyrights and trademarks. 
C) brand-name recognition. 
D) rapid diffusion. 
A) patents. 
B) copyrights and trademarks. 
C) brand-name recognition. 
D) rapid diffusion.

Question 20

The major source of new scientific knowledge in the United States is

Accepted Answer

A) university and government research. 
B) R&D work in large corporations. 
C) entrepreneurs working alone. 
D) purely competitive and monopolistically competitive firms. 
A) university and government research. 
B) R&D work in large corporations. 
C) entrepreneurs working alone. 
D) purely competitive and monopolistically competitive firms.

Exam 15: Technology, RD, and Efficiency

Which of the following statements is most accurate about business R&D spending in the United States?

The modern view of technological advance is that it

Technological advance is a three-step process involving

Product innovation contributes to technological advance primarily by

What are the differences between the short run, long run, and very long run?

One of the major advantages of being the first to develop a product is

Which of the following firms was not a "start-up"?

A firm's optimal amount of R&D occurs where the interest-rate cost of funds and the expected rate of return are equal.

Which among the following is the strongest determinant of an industry's technological progressiveness?

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 9 percent. What will be the marginal cost and the marginal benefit of the optimal amount of R&D spending?

In 2016, about ____ percent of U.S. business R&D spending was for basic research.

Which market structure has a strong incentive for product development and differentiation?

Which of the following would be the best example of a "start-up"?

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

Technological advance is shown as a(n)

Which of the following statements about technological advance is not true?

Technological advance increases productive efficiency by giving society a more preferred mix of goods.

Joseph Schumpeter viewed capitalism as a process of "creative destruction" because

Factors that help firms who invent and innovate deal with the "imitation problem" include all of the following, except

The major source of new scientific knowledge in the United States is

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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