Question 1

The interest-rate cost-of-funds curve is perfectly elastic because expected rates of return on R&D are constant.

Accepted Answer

A) True 
 B)False  False

Question 2

Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic.Which of the following would decrease a firm's optimal R&D expenditures and,in equilibrium,increase the expected rate of return on the last dollar of R&D?

Accepted Answer

A)  A rightward shift of the expected-rate-of-return curve. 
B)  An upward shift of the interest-rate cost-of-funds curve. 
C)  A leftward shift of the expected-rate-of-return curve. 
D)  A downward shift of the interest-rate cost-of-funds curve. 
A)  A rightward shift of the expected-rate-of-return curve. 
B)  An upward shift of the interest-rate cost-of-funds curve. 
C)  A leftward shift of the expected-rate-of-return curve. 
D)  A downward shift of the interest-rate cost-of-funds curve. B

Question 3

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 it gains from innovation. 
C)  the large size of oligopolists' R&D departments allows them to use very specialized,expensive R&D equipment and employ teams of specialized researchers. 
D)  all of these 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 it gains from innovation. 
C)  the large size of oligopolists' R&D departments allows them to use very specialized,expensive R&D equipment and employ teams of specialized researchers. 
D)  all of these are true. D

Question 4

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 5

In the United States,research and development spending as a percentage of GDP is:

Accepted Answer

A)  1.5 to 2.0 percent,which is lower than that of most other industrial countries. 
B)  2.5 to 3.0 percent,which is higher than that of most other industrial countries. 
C)  4.5 to 5.0 percent,which is lower than that of most other industrial countries. 
D)  5.5 to 6.0 percent,which is higher than that of most other industrial countries. 
A)  1.5 to 2.0 percent,which is lower than that of most other industrial countries. 
B)  2.5 to 3.0 percent,which is higher than that of most other industrial countries. 
C)  4.5 to 5.0 percent,which is lower than that of most other industrial countries. 
D)  5.5 to 6.0 percent,which is higher than that of most other industrial countries.

Question 6

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 7

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)  the 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)  the expected returns,though potentially very large,are uncertain.

Question 8

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 9

Kodak introduced to the marketplace a digital camera that uses no film but that takes photos that can be shown on personal computers.This is an example of:

Accepted Answer

A)  economies of scale. 
B)  product innovation. 
C)  process innovation. 
D)  venture capital. 
A)  economies of scale. 
B)  product innovation. 
C)  process innovation. 
D)  venture capital.

Question 10

The successful commercial introduction of a new product,the use of a new method,or the creation of a new form of business enterprise is called:

Accepted Answer

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

Question 11

The wide imitation and spread of an innovation is called:

Accepted Answer

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

Question 12

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 these. 
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 these.

Question 13

In general,the:

Accepted Answer

A)  number of firms in the industry is far more important than the industry's scientific character and extent of technological opportunities. 
B)  greater an industry's concentration ratio,the higher are its R&D expenditures in relation to sales. 
C)  industry's scientific character and extent of technological opportunities often are more important than the industry's concentration ratio. 
D)  higher the industry's interest cost of borrowing funds for R&D,the greater is the industry's progressiveness. 
A)  number of firms in the industry is far more important than the industry's scientific character and extent of technological opportunities. 
B)  greater an industry's concentration ratio,the higher are its R&D expenditures in relation to sales. 
C)  industry's scientific character and extent of technological opportunities often are more important than the industry's concentration ratio. 
D)  higher the industry's interest cost of borrowing funds for R&D,the greater is the industry's progressiveness.

Question 14

(Consider This)Violin strings made from sheep intestines were first called "catgut" because:

Accepted Answer

A)  at the time it was thought to be extremely unlucky to kill sheep. 
B)  the inventor wanted to establish a legally protected brand name. 
C)  the inventor wanted to preserve his trade secret. 
D)  the inventor thought that "catgut" would sound less offensive to buyers than "sheep intestines." 
A)  at the time it was thought to be extremely unlucky to kill sheep. 
B)  the inventor wanted to establish a legally protected brand name. 
C)  the inventor wanted to preserve his trade secret. 
D)  the inventor thought that "catgut" would sound less offensive to buyers than "sheep intestines."

Question 15

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 16

Technological advance improves allocative efficiency by:

Accepted Answer

A)  enhancing monopoly power. 
B)  reducing income inequality. 
C)  giving society a more-preferred mix of goods and services. 
D)  encouraging saving. 
A)  enhancing monopoly power. 
B)  reducing income inequality. 
C)  giving society a more-preferred mix of goods and services. 
D)  encouraging saving.

Question 17

Fast-second strategies are more likely to be used by:

Accepted Answer

A)  dominant firms than by start-up firms. 
B)  pure competitors rather than by oligopolists. 
C)  start-up firms rather than by existing firms. 
D)  entrepreneurs rather than by corporations. 
A)  dominant firms than by start-up firms. 
B)  pure competitors rather than by oligopolists. 
C)  start-up firms rather than by existing firms. 
D)  entrepreneurs rather than by corporations.

Question 18

Process innovation causes an upward shift in a firm's total product curve and:

Accepted Answer

A)  a decrease in its average product. 
B)  a downward shift in its average total cost curve. 
C)  an upward shift in its average total cost curve. 
D)  an upward shift in its marginal revenue curve. 
A)  a decrease in its average product. 
B)  a downward shift in its average total cost curve. 
C)  an upward shift in its average total cost curve. 
D)  an upward shift in its marginal revenue curve.

Question 19

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 20

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.

Exam 14: Technology RD and Efficiency

The interest-rate cost-of-funds curve is perfectly elastic because expected rates of return on R&D are constant.

Assume that a firm's interest-rate cost-of-funds curve for R&D is perfectly elastic.Which of the following would decrease a firm's optimal R&D expenditures and,in equilibrium,increase the expected rate of return on the last dollar of R&D?

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

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 __________.

In the United States,research and development spending as a percentage of GDP is:

Other things equal,the prospect of imitation by others:

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

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

Kodak introduced to the marketplace a digital camera that uses no film but that takes photos that can be shown on personal computers.This is an example of:

The successful commercial introduction of a new product,the use of a new method,or the creation of a new form of business enterprise is called:

The wide imitation and spread of an innovation is called:

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

In general,the:

(Consider This)Violin strings made from sheep intestines were first called "catgut" because:

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

Technological advance improves allocative efficiency by:

Fast-second strategies are more likely to be used by:

Process innovation causes an upward shift in a firm's total product curve and:

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:

For a new product to be profitable,it must:

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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

Filters

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 __.