Question 1

One of the outcomes for society from product innovation is

Accepted Answer

A)  more concentration in industry. 
B)  less scientific research. 
C)  greater total utility. 
D)  fewer mergers. 
A)  more concentration in industry. 
B)  less scientific research. 
C)  greater total utility. 
D)  fewer mergers.

Question 2

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. What is the expected rate of return on this research and development expenditure?

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 3

Legal protections against competitors producing and selling a product identical to the one you invented are called ; legal protections against competitors using your product's name are called .

Accepted Answer

A)  patents; trademarks 
B)  trademarks; copyrights 
C)  copyrights; patents 
D)  trademarks; patents 
A)  patents; trademarks 
B)  trademarks; copyrights 
C)  copyrights; patents 
D)  trademarks; patents

Question 4

Entrepreneurs are those people who are

Accepted Answer

A)  their own bosses. 
B)  executive officers of corporations. 
C)  salaried managers. 
D)  working for research institutes. 
A)  their own bosses. 
B)  executive officers of corporations. 
C)  salaried managers. 
D)  working for research institutes.

Question 5

Product innovation will be successful only if it makes the product's

Accepted Answer

A)  marginal utility increase. 
B)  price decrease. 
C)  marginal-utility-to-price ratio increase. 
D)  marginal-utility-to-price ratio decrease. 
A)  marginal utility increase. 
B)  price decrease. 
C)  marginal-utility-to-price ratio increase. 
D)  marginal-utility-to-price ratio decrease.

Question 6

Which pair of market structures provides firms with the greatest ability to finance R&D out of retained earnings?

Accepted Answer

A)  oligopolists and pure monopolists 
B)  pure competitors and pure monopolists 
C)  pure competitors and monopolistic competitors 
D)  monopolistic competitors and pure monopolists 
A)  oligopolists and pure monopolists 
B)  pure competitors and pure monopolists 
C)  pure competitors and monopolistic competitors 
D)  monopolistic competitors and pure monopolists

Question 7

Invention and innovation are not the same; innovation tends be derived from invention.

Accepted Answer

A) True 
 B)False

Question 8

A consumer had been consuming product X for some time. This period, she buys fewer X in order to try some units of a new product Y. She finds that her marginal utility of X is 20 (at a price of $10 per unit), while the marginal utility of Y is 36 (at a price of $12). The utility-maximizing rule suggests that this consumer should

Accepted Answer

A)  increase consumption of product X because of its lower price. 
B)  increase consumption of product X because it is an old reliable product. 
C)  increase consumption of product Y because it has a higher MU/P. 
D)  increase consumption of product Y because it has a higher MU. 
A)  increase consumption of product X because of its lower price. 
B)  increase consumption of product X because it is an old reliable product. 
C)  increase consumption of product Y because it has a higher MU/P. 
D)  increase consumption of product Y because it has a higher MU.

Question 9

All inventors are entrepreneurs.

Accepted Answer

A) True 
 B)False

Question 10

U.S. business firms channel a majority of their R&D expenditures to scientific research.

Accepted Answer

A) True 
 B)False

Question 11

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 12

A "fast-second strategy" refers to a situation where small competitors of a dominant firm will wait for the dominant firm to innovate, and then quickly imitate the dominant firm's innovations.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  Google 
B)  Starbucks 
C)  Apple 
D)  Lucent Technologies 
A)  Google 
B)  Starbucks 
C)  Apple 
D)  Lucent Technologies

Question 14

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 15

Creative destruction is the situation where the creation of new products destroys the monopoly market positions of firms producing existing products.

Accepted Answer

A) True 
 B)False

Question 16

The spread of an innovation to other products through imitation is called

Accepted Answer

A)  invention. 
B)  development. 
C)  diffusion. 
D)  applied research. 
A)  invention. 
B)  development. 
C)  diffusion. 
D)  applied research.

Question 17

Those who contend that oligopolists are less likely than more competitive firms to engage in R&D say that

Accepted Answer

A)  oligopolists have little incentive to introduce costly new technology and produce new products when they currently are earning large economic profit using existing technology and selling existing products. 
B)  the undistributed profits of oligopolists give them a source of readily available, relatively low-cost funds for financing R&D. 
C)  entry barriers enable oligopolists to sustain the profits they gain from innovation. 
D)  the large size of oligopolists' R&D departments allows them to use very specialized, expensive R&D equipment and employ teams of specialized researchers. 
A)  oligopolists have little incentive to introduce costly new technology and produce new products when they currently are earning large economic profit using existing technology and selling existing products. 
B)  the undistributed profits of oligopolists give them a source of readily available, relatively low-cost funds for financing R&D. 
C)  entry barriers enable oligopolists to sustain the profits they gain from innovation. 
D)  the large size of oligopolists' R&D departments allows them to use very specialized, expensive R&D equipment and employ teams of specialized researchers.

Question 18

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

Accepted Answer

A)  not undertake the R&D expenditure if its interest-rate cost of borrowing is 8 percent. 
B)  undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent. 
C)  undertake the R&D expenditure if its interest-rate cost of borrowing is 20 percent. 
D)  undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent. 
A)  not undertake the R&D expenditure if its interest-rate cost of borrowing is 8 percent. 
B)  undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent. 
C)  undertake the R&D expenditure if its interest-rate cost of borrowing is 20 percent. 
D)  undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent.

Question 19

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.

Question 20

Which would be an example of innovation within an existing business firm?

Accepted Answer

A)  the development of Post-it note pads by the 3M Corporation 
B)  the granting of a patent to a university researcher 
C)  the formation of the start-up firm Amgen 
D)  the merger of AOL and Time-Warner 
A)  the development of Post-it note pads by the 3M Corporation 
B)  the granting of a patent to a university researcher 
C)  the formation of the start-up firm Amgen 
D)  the merger of AOL and Time-Warner

Exam 15: Technology, Rd, and Efficiency

One of the outcomes for society from product innovation is

Legal protections against competitors producing and selling a product identical to the one you invented are called ; legal protections against competitors using your product's name are called .

Entrepreneurs are those people who are

Product innovation will be successful only if it makes the product's

Which pair of market structures provides firms with the greatest ability to finance R&D out of retained earnings?

Invention and innovation are not the same; innovation tends be derived from invention.

All inventors are entrepreneurs.

U.S. business firms channel a majority of their R&D expenditures to scientific research.

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

A "fast-second strategy" refers to a situation where small competitors of a dominant firm will wait for the dominant firm to innovate, and then quickly imitate the dominant firm's innovations.

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

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

Creative destruction is the situation where the creation of new products destroys the monopoly market positions of firms producing existing products.

The spread of an innovation to other products through imitation is called

Those who contend that oligopolists are less likely than more competitive firms to engage in R&D say that

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

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

Which would be an example of innovation within an existing business firm?

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

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Immigration

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The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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