Question 1

Successful new products enable consumers to increase the total utility they obtain from a specific amount of their total spending.

Accepted Answer

A) True 
 B)False

Question 2

A common way by which governments encourage invention is by providing the inventor with a

Accepted Answer

A) patent. 
B) copyright. 
C) trade secret. 
D) trademark. 
A) patent. 
B) copyright. 
C) trade secret. 
D) trademark.

Question 3

Suppose that a firm's legal staff concludes that a new product that the firm is developing is patentable. Graphically, this new information would shift the firm's expected-rate-of-return curve on R&D to the

Accepted Answer

A) right and reduce its optimal amount of R&D. 
B) right and increase its optimal amount of R&D. 
C) left and increase its optimal amount of R&D. 
D) left and reduce its optimal amount of R&D. 
A) right and reduce its optimal amount of R&D. 
B) right and increase its optimal amount of R&D. 
C) left and increase its optimal amount of R&D. 
D) left and reduce its optimal amount of R&D.

Question 4

Consumer acceptance of a new product depends on

Accepted Answer

A) price alone. 
B) marginal utility alone. 
C) price and marginal utility. 
D) total utility divided by marginal utility. 
A) price alone. 
B) marginal utility alone. 
C) price and marginal utility. 
D) total utility divided by marginal utility.

Question 5

Suppose that a firm successfully introduces a highly profitable new product. If this new product offers less marginal utility per unit to consumers than existing substitute products, then the

Accepted Answer

A) laws of economics have been violated. 
B) new product must have increasing, not diminishing, marginal utility. 
C) existing products were being produced at a loss. 
D) new product has a lower price than the existing substitute products. 
A) laws of economics have been violated. 
B) new product must have increasing, not diminishing, marginal utility. 
C) existing products were being produced at a loss. 
D) new product has a lower price than the existing substitute products.

Question 6

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC₁ to ATC₂?

Accepted Answer

A) replacement of old equipment with new, more productive equipment embodying technological advance 
B) a decrease in the incomes of A's customers 
C) a move along A's total product curve (not shown) 
D) the increase in the price of one of the major inputs used to produce A's product 
A) replacement of old equipment with new, more productive equipment embodying technological advance 
B) a decrease in the incomes of A's customers 
C) a move along A's total product curve (not shown) 
D) the increase in the price of one of the major inputs used to produce A's product

Question 7

Entrepreneurs

Accepted Answer

A) include everyone engaged in R&D work. 
B) are located in small enterprises only. 
C) differ from other innovators because of the risks entrepreneurs must bear. 
D) work exclusively in government and university R&D laboratories. 
A) include everyone engaged in R&D work. 
B) are located in small enterprises only. 
C) differ from other innovators because of the risks entrepreneurs must bear. 
D) work exclusively in government and university R&D laboratories.

Question 8

In the diagram, at $60 million of R&D expenditure, the

Accepted Answer

A) expected rate of return exceeds the interest-rate cost of funds. 
B) firm is spending an optimal amount on R&D. 
C) interest-rate cost of funds exceeds the expected rate of return. 
D) expected rate of return on R&D is negative. 
A) expected rate of return exceeds the interest-rate cost of funds. 
B) firm is spending an optimal amount on R&D. 
C) interest-rate cost of funds exceeds the expected rate of return. 
D) expected rate of return on R&D is negative.

Question 9

Refer to the data for a consumer whose income = $12. Assume new product Z is introduced. How many units of Z will this consumer buy, given his or her $12 budget?

Accepted Answer

A) 6 units 
B) 4 units 
C) 2 units 
D) 0 units 
A) 6 units 
B) 4 units 
C) 2 units 
D) 0 units

Question 10

All inventors are entrepreneurs.

Accepted Answer

A) True 
 B)False

Question 11

In encouraging R&D and invention, patents are most necessary

Accepted Answer

A) in industries with complicated products that are hard to copy and market. 
B) in industries with simple products that are easy to copy and market. 
C) in purely competitive industries. 
D) for stopping infringement lawsuits. 
A) in industries with complicated products that are hard to copy and market. 
B) in industries with simple products that are easy to copy and market. 
C) in purely competitive industries. 
D) for stopping infringement lawsuits.

Question 12

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

Accepted Answer

A) number of firms in the industry. 
B) length of time for government patents. 
C) scientific character of the industry. 
D) imitation problem in the industry. 
A) number of firms in the industry. 
B) length of time for government patents. 
C) scientific character of the industry. 
D) imitation problem in the industry.

Question 13

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds falls from 10 percent to 6 percent. What will happen to the optimal amount of R&D spending?

Accepted Answer

A) It increases from $24 billion to $36 billion. 
B) It increases from $24 billion to $42 billion. 
C) It decreases from $36 billion to $24 billion. 
D) It decreases from $42 billion to $24 billion. 
A) It increases from $24 billion to $36 billion. 
B) It increases from $24 billion to $42 billion. 
C) It decreases from $36 billion to $24 billion. 
D) It decreases from $42 billion to $24 billion.

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 $4, and the price of good Y is $3. The budget of the consumer is $12. If the consumer can only buy old product X, how much will the consumer buy and what will be the total utility from spending the given budget?

Accepted Answer

A) 4X and 42 
B) 3X and 12 
C) 5X and 60 
D) 3X and 42 
A) 4X and 42 
B) 3X and 12 
C) 5X and 60 
D) 3X and 42

Question 15

Someone who seeks to be hired as the top manager of an existing company is a good example of an entrepreneur.

Accepted Answer

A) True 
 B)False

Question 16

If an entrepreneur uses personal funds, is there a cost for financing?

Accepted Answer

Yes, there is an opportunity c

Question 17

Even where imitation is possible, a firm may gain advantage from being the first to introduce an innovative product because of

Accepted Answer

A) long-lasting brand-name recognition. 
B) a time lag between innovation and imitation by rivals. 
C) trade secrets that limit the ability of rivals to exactly imitate the product. 
D) all of the other answers are correct. 
A) long-lasting brand-name recognition. 
B) a time lag between innovation and imitation by rivals. 
C) trade secrets that limit the ability of rivals to exactly imitate the product. 
D) all of the other answers are correct.

Question 18

As related to businesses, the term "research and development" is used loosely to include direct efforts toward

Accepted Answer

A) invention, innovation, and diffusion. 
B) basic research and applied research. 
C) laboratory research and business research. 
D) academic research and economic development. 
A) invention, innovation, and diffusion. 
B) basic research and applied research. 
C) laboratory research and business research. 
D) academic research and economic development.

Question 19

The optimal amount of R&D for a firm depends on the following, except

Accepted Answer

A) marginal cost of funds for R&D projects. 
B) marginal benefit of R&D projects. 
C) expected profitability of R&D projects. 
D) amount of funds the firm currently has for R&D projects. 
A) marginal cost of funds for R&D projects. 
B) marginal benefit of R&D projects. 
C) expected profitability of R&D projects. 
D) amount of funds the firm currently has for R&D projects.

Question 20

Technological advance is a three-step process of

Accepted Answer

A) product development, production, and marketing. 
B) creative destruction, start-ups, and patenting. 
C) breakthrough, consolidation, and distribution. 
D) invention, innovation, and diffusion. 
A) product development, production, and marketing. 
B) creative destruction, start-ups, and patenting. 
C) breakthrough, consolidation, and distribution. 
D) invention, innovation, and diffusion.

Exam 15: Technology, RD, and Efficiency

Successful new products enable consumers to increase the total utility they obtain from a specific amount of their total spending.

A common way by which governments encourage invention is by providing the inventor with a

Suppose that a firm's legal staff concludes that a new product that the firm is developing is patentable. Graphically, this new information would shift the firm's expected-rate-of-return curve on R&D to the

Consumer acceptance of a new product depends on

Suppose that a firm successfully introduces a highly profitable new product. If this new product offers less marginal utility per unit to consumers than existing substitute products, then the

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC₁ to ATC₂?

Entrepreneurs

In the diagram, at $60 million of R&D expenditure, the

Refer to the data for a consumer whose income = $12. Assume new product Z is introduced. How many units of Z will this consumer buy, given his or her $12 budget?

All inventors are entrepreneurs.

In encouraging R&D and invention, patents are most necessary

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds falls from 10 percent to 6 percent. What will happen to the optimal amount of R&D spending?

Someone who seeks to be hired as the top manager of an existing company is a good example of an entrepreneur.

If an entrepreneur uses personal funds, is there a cost for financing?

Even where imitation is possible, a firm may gain advantage from being the first to introduce an innovative product because of

As related to businesses, the term "research and development" is used loosely to include direct efforts toward

The optimal amount of R&D for a firm depends on the following, except

Technological advance is a three-step process of

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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