Question 1

What is an example of a technological breakthrough that came out of a government or university laboratory?

Accepted Answer

A)  hybrid seeds 
B)  Scotch tape 
C)  Thinsulate insulation 
D)  Post-it note pads 
A)  hybrid seeds 
B)  Scotch tape 
C)  Thinsulate insulation 
D)  Post-it note pads

Question 2

A profit-maximizing firm should not undertake an R&D project for which the

Accepted Answer

A)  expected rate of return exceeds its interest-rate cost of funds. 
B)  interest-rate cost of funds exceeds the expected rate of return. 
C)  expected returns are in the distant future. 
D)  expected returns, though potentially very large, are uncertain. 
A)  expected rate of return exceeds its interest-rate cost of funds. 
B)  interest-rate cost of funds exceeds the expected rate of return. 
C)  expected returns are in the distant future. 
D)  expected returns, though potentially very large, are uncertain.

Question 3

Which of the following does not aptly describe innovation?

Accepted Answer

A)  first commercial use of a new production process 
B)  discovery of a new production method 
C)  creation of a new form of business enterprise 
D)  commercial introduction of a new product 
A)  first commercial use of a new production process 
B)  discovery of a new production method 
C)  creation of a new form of business enterprise 
D)  commercial introduction of a new product

Question 4

The first commercial introduction of transparent tape is an example of

Accepted Answer

A)  innovation. 
B)  invention. 
C)  creative destruction. 
D)  diffusion. 
A)  innovation. 
B)  invention. 
C)  creative destruction. 
D)  diffusion.

Question 5

Consumers will make a decision to purchase a new product only if it

Accepted Answer

A)  has a lower marginal utility per dollar spent than another product. 
B)  is recommended as a valuable product by other consumers. 
C)  increases the total utility they obtain from their limited income. 
D)  can be sold at a lower price than that for a competing product. 
A)  has a lower marginal utility per dollar spent than another product. 
B)  is recommended as a valuable product by other consumers. 
C)  increases the total utility they obtain from their limited income. 
D)  can be sold at a lower price than that for a competing product.

Question 6

The reason that innovation promotes competition is because

Accepted Answer

A)  innovative firms can charge any price they want for a new product. 
B)  it lowers the research and development costs for innovative firms. 
C)  firms use it to make competitors' products obsolete in the market. 
D)  government provides patent protection for innovation that lasts for a long time. 
A)  innovative firms can charge any price they want for a new product. 
B)  it lowers the research and development costs for innovative firms. 
C)  firms use it to make competitors' products obsolete in the market. 
D)  government provides patent protection for innovation that lasts for a long time.

Question 7

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 8

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

Accepted Answer

A) True 
 B)False

Question 9

The inverted-U theory suggests that R&D effort is strongest in very high concentration industries.

Accepted Answer

A) True 
 B)False

Question 10

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 11

Technological advance consists of short-run adjustments to the production process that reduce costs.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

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.

Question 14

The conjecture that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall as industry concentration rises is known as the

Accepted Answer

A)  inverted-U theory of R&D. 
B)  average product of R&D theory. 
C)  bell-shaped-curve theory of product innovation. 
D)  theory of increasing and diminishing returns. 
A)  inverted-U theory of R&D. 
B)  average product of R&D theory. 
C)  bell-shaped-curve theory of product innovation. 
D)  theory of increasing and diminishing returns.

Question 15

Technological advance may lead to new monopolies and may also destroy existing monopolies.

Accepted Answer

A) True 
 B)False

Question 16

The first working prototype of a microcomputer chip would be an example of an

Accepted Answer

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

Question 17

Other things equal, the prospect of imitation by others

Accepted Answer

A)  decreases the expected rate of return on R&D expenditures. 
B)  increases the expected rate of return on R&D expenditures. 
C)  increases the interest-rate cost of funds used to finance R&D expenditures. 
D)  decreases the interest-rate cost of funds used to finance R&D expenditures. 
A)  decreases the expected rate of return on R&D expenditures. 
B)  increases the expected rate of return on R&D expenditures. 
C)  increases the interest-rate cost of funds used to finance R&D expenditures. 
D)  decreases the interest-rate cost of funds used to finance R&D expenditures.

Question 18

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 19

Innovation is the first discovery of a new product or production process; invention is the first successful commercial introduction of the product or process.

Accepted Answer

A) True 
 B)False

Question 20

Suppose a firm anticipates that an R&D expenditure of $100 million will result in a new production process that will reduce costs and thus create a one-time added profit of $112 million a year later. The firm's expected rate of return is

Accepted Answer

A)  0.12 percent. 
B)  112 percent. 
C)  12 percent. 
D)  2 percent. 
A)  0.12 percent. 
B)  112 percent. 
C)  12 percent. 
D)  2 percent.

Exam 15: Technology, Rd, and Efficiency

What is an example of a technological breakthrough that came out of a government or university laboratory?

A profit-maximizing firm should not undertake an R&D project for which the

Which of the following does not aptly describe innovation?

The first commercial introduction of transparent tape is an example of

Consumers will make a decision to purchase a new product only if it

The reason that innovation promotes competition is because

Consumer acceptance of a new product depends on

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

The inverted-U theory suggests that R&D effort is strongest in very high concentration industries.

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

Technological advance consists of short-run adjustments to the production process that reduce costs.

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

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

The conjecture that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and then fall as industry concentration rises is known as the

Technological advance may lead to new monopolies and may also destroy existing monopolies.

The first working prototype of a microcomputer chip would be an example of an

Other things equal, the prospect of imitation by others

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

Innovation is the first discovery of a new product or production process; invention is the first successful commercial introduction of the product or process.

Suppose a firm anticipates that an R&D expenditure of $100 million will result in a new production process that will reduce costs and thus create a one-time added profit of $112 million a year later. The firm's expected rate of return is

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

Filters