Question 1

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. A

Question 2

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. 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 are the total cost and average cost of producing the 3,000 units of output?

Accepted Answer

A)  TC = $4,000; ATC = $2.00 
B)  TC = $8,000; ATC = $3.00 
C)  TC = $10,000; ATC = $3.33 
D)  TC = $15,000; ATC = $6.00 
A)  TC = $4,000; ATC = $2.00 
B)  TC = $8,000; ATC = $3.00 
C)  TC = $10,000; ATC = $3.33 
D)  TC = $15,000; ATC = $6.00 C

Question 3

Process innovation can be depicted as

Accepted Answer

A)  an upward shift in a firm's total product curve. 
B)  an upward shift in a firm's marginal cost curve. 
C)  a downward shift in a firm's marginal revenue curve. 
D)  an increase in product demand. 
A)  an upward shift in a firm's total product curve. 
B)  an upward shift in a firm's marginal cost curve. 
C)  a downward shift in a firm's marginal revenue curve. 
D)  an increase in product demand. A

Question 4

The two types of innovation are product innovation and

Accepted Answer

A)  resource innovation. 
B)  market innovation. 
C)  process innovation. 
D)  financial innovation. 
A)  resource innovation. 
B)  market innovation. 
C)  process innovation. 
D)  financial innovation.

Question 5

Suppose that a firm successfully introduces a highly profitable new product. If this new product is priced higher than existing substitute products, then the

Accepted Answer

A)  new product has greater marginal utility than the existing products. 
B)  laws of economics have been violated. 
C)  new product must have increasing, not diminishing, marginal utility. 
D)  existing products were unprofitable to produce. 
A)  new product has greater marginal utility than the existing products. 
B)  laws of economics have been violated. 
C)  new product must have increasing, not diminishing, marginal utility. 
D)  existing products were unprofitable to produce.

Question 6

The optimal market structure for technological advance seems to be an industry in which

Accepted Answer

A)  most firms are purely competitive. 
B)  there is a natural monopoly with a large market for the product. 
C)  there are oligopolistic firms and several small and highly innovative firms. 
D)  the government provides some funding for research and development. 
A)  most firms are purely competitive. 
B)  there is a natural monopoly with a large market for the product. 
C)  there are oligopolistic firms and several small and highly innovative firms. 
D)  the government provides some funding for research and development.

Question 7

As it relates to R&D, the expected-rate-of-return curve, r,

Accepted Answer

A)  usually slopes upward. 
B)  shows the cost of financing various levels of R&D. 
C)  varies in location depending on the location of the interest-rate cost-of-funds curve, i. 
D)  represents the marginal benefit element in the MB = MC decision framework. 
A)  usually slopes upward. 
B)  shows the cost of financing various levels of R&D. 
C)  varies in location depending on the location of the interest-rate cost-of-funds curve, i. 
D)  represents the marginal benefit element in the MB = MC decision framework.

Question 8

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 9

In economists' models, technological advance occurs in

Accepted Answer

A)  the very long run. 
B)  either the short run, long run, or very long run. 
C)  manufacturing industries but not in service industries. 
D)  pure competition but not in monopolistic competition, oligopoly, and pure monopoly. 
A)  the very long run. 
B)  either the short run, long run, or very long run. 
C)  manufacturing industries but not in service industries. 
D)  pure competition but not in monopolistic competition, oligopoly, and pure monopoly.

Question 10

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.

Question 11

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 12

A firm decides to make a $20 million expenditure on research and development that will create a new product. This product is expected to increase the firm's revenues by a total of $24 million in the next year. The firm also estimates that the production cost of the new product will be $22 million. If the firm has to take out a loan to finance the project, what is the highest interest rate it will pay and still do the project among the choices given?

Accepted Answer

A)  8.3 percent 
B)  9.1 percent 
C)  10 percent 
D)  20 percent 
A)  8.3 percent 
B)  9.1 percent 
C)  10 percent 
D)  20 percent

Question 13

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 14

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 15

For a new product to be profitable, it must

Accepted Answer

A)  enable customers to obtain greater total utility from their money income. 
B)  be less expensive than existing substitute products. 
C)  have greater marginal utility than existing substitute products. 
D)  embody process innovation. 
A)  enable customers to obtain greater total utility from their money income. 
B)  be less expensive than existing substitute products. 
C)  have greater marginal utility than existing substitute products. 
D)  embody process innovation.

Question 16

(Last Word) Which of the following best explains why most basic scientific research in the United States is financed by the government?

Accepted Answer

A)  Basic scientific research takes a long time to become commercially viable. 
B)  Basic scientific research rarely results in commercially viable discoveries. 
C)  Federal law limits basic scientific research because of potential national security threats. 
D)  Private firms collectively spend far less on all types of R&D than the federal government. 
A)  Basic scientific research takes a long time to become commercially viable. 
B)  Basic scientific research rarely results in commercially viable discoveries. 
C)  Federal law limits basic scientific research because of potential national security threats. 
D)  Private firms collectively spend far less on all types of R&D than the federal government.

Question 17

A firm's optimal amount of R&D occurs where the marginal benefit of this activity exceeds marginal cost by the greatest amount.

Accepted Answer

A) True 
 B)False

Question 18

An industry with which of the following four-firm concentration ratios would tend to have the greatest amount of R&D expenditures as a percentage of sales?

Accepted Answer

A)  0 
B)  10 
C)  50 
D)  100 
A)  0 
B)  10 
C)  50 
D)  100

Question 19

Which of the following is a true statement?

Accepted Answer

A)  Innovation normally follows invention and precedes diffusion. 
B)  Invention normally follows diffusion and precedes innovation. 
C)  Diffusion normally follows invention and precedes innovation. 
D)  Innovation normally follows diffusion and precedes invention. 
A)  Innovation normally follows invention and precedes diffusion. 
B)  Invention normally follows diffusion and precedes innovation. 
C)  Diffusion normally follows invention and precedes innovation. 
D)  Innovation normally follows diffusion and precedes invention.

Question 20

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.

Exam 15: Technology, Rd, and Efficiency

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

Process innovation can be depicted as

The two types of innovation are product innovation and

Suppose that a firm successfully introduces a highly profitable new product. If this new product is priced higher than existing substitute products, then the

The optimal market structure for technological advance seems to be an industry in which

As it relates to R&D, the expected-rate-of-return curve, r,

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

In economists' models, technological advance occurs in

Technological advance is a three-step process of

Technological advance is a three-step process involving

Entrepreneurs and innovative firms with past successes in developing products

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

For a new product to be profitable, it must

(Last Word) Which of the following best explains why most basic scientific research in the United States is financed by the government?

A firm's optimal amount of R&D occurs where the marginal benefit of this activity exceeds marginal cost by the greatest amount.

An industry with which of the following four-firm concentration ratios would tend to have the greatest amount of R&D expenditures as a percentage of sales?

Which of the following is a true statement?

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

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role 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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