Question 1

Which of the following supports the contention that pure competitors have a weak incentive to engage in R&D?

Accepted Answer

A)  Entry to purely competitive industries is easy, and thus profit from innovation is quickly competed away.
B)  In pure competition, products are already highly differentiated.
C)  Most purely competitive industries are increasing-cost industries.
D)  Pure competitors are happy to earn only a normal profit.E) B) and C)
F) B) and D)

Question 2

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.E) C) and D)
F) B) and C)

Question 3

The first commercial introduction of transparent tape is an example of

Accepted Answer

A)  innovation.
B)  invention.
C)  creative destruction.
D)  diffusion.E) None of the above
F) B) and D)

Question 4

In the 1800s, railroads broke up the monopoly position of wagons, ships, and barges as the major means of transporting goods.This would be an example of

Accepted Answer

A)  the fast-second strategy.
B)  the inverted-U theory.
C)  creative destruction.
D)  venture capital.E) None of the above
F) A) and B)

Question 5

The major impact of product innovation tends to be on the firms' revenues, while that of process innovation tends to be on costs.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following supports the contention that pure competitors have a strong incentive to engage in R&D?

Accepted Answer

A)  Entry to purely competitive industries is easy, and thus profit from innovation is quickly competed away.
B)  Pure competitors cannot risk being complacent about innovation because a new product, production technique, or distribution method could undermine their normal
C)  Most purely competitive industries are increasing-cost industries.
D)  Pure competitors are happy to earn only a normal profit.E) None of the above
F) B) and D)

Question 7

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.Originally the firm produced 2,000 units of output by combining its fixed capital with 200 units of labor and 500 units of raw materials.Now the firm changes 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 happened to average total cost?

Accepted Answer

A)  ATC decreased by $2.67
B)  ATC increased by $2.67
C)  ATC increased by $3.33
D)  ATC decreased by $3.33E) A) and B)
F) None of the above

Question 8

In choosing between an old reliable product and a new attractive product, the consumer will

Accepted Answer

A)  always buy the product with the lower price.
B)  always buy the product with the higher MU.
C)  buy the one with the higher MU-to-P ratio.
D)  buy the one with the lower MU-to-P ratio.E) A) and B)
F) All of the above

Question 9

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.E) None of the above
F) A) and D)

Question 10

In the inverted-U theory of R&D,

Accepted Answer

A)  process innovation and product innovation are inversely related.
B)  technological change is inversely related to scientific discovery.
C)  R&D expenditures rise continuously as a percentage of firms' sales as industry concentration rises.
D)  R&D expenditures first rise as a percentage of firms' sales as industry concentration increases, but then fall as higher industry concentration occurs.E) A) and C)
F) None of the above

Question 11

Technological advance is shown as a(n)

Accepted Answer

A)  movement from a point inside a production possibilities curve to a point on the curve.
B)  movement along a production possibilities curve.
C)  outward shift of a production possibilities curve.
D)  inward shift of a production possibilities curve.E) B) and C)
F) A) and D)

Question 12

Imitation by rivals tends to enhance the profits of the innovating firms.

Accepted Answer

A) True 
 B)False

Question 13

R&D spending decisions are complicated because

Accepted Answer

A)  costs of R&D are immediate, while benefits occur at some future time and are uncertain.
B)  benefits of R&D are clear, but costs are complicated and hard to estimate.
C)  there are so many different sources of funds for R&D, and they each require different returns.
D)  it is difficult to determine which R&D activities could be patented.E) B) and C)
F) A) and B)

Question 14

(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.E) A) and B)
F) A) and C)

Question 15

The technical and scientific characteristics of an industry may be less important than its structure in determining R&D spending and innovation.

Accepted Answer

A) True 
 B)False

Question 16

The inverted-U theory of R&D suggests that more R&D spending will be done by oligopolists than by firms producing in the other market structures.

Accepted Answer

A) True 
 B)False

Question 17

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 18

The marginal cost to a firm of R&D expenditures is the market interest rate the firm must pay to obtain the needed financing.

Accepted Answer

A) True 
 B)False

Question 19

(Last Word)  Many economists believe that the federal government

Accepted Answer

A)  spends far too much on basic scientific research, as this activity should be reserved for the private sector.
B)  should spend more on basic scientific research because scientific knowledge is a public good with significant positive externalities.
C)  should conduct all R&D activity in the economy, limiting firms' ability to gain monopoly power through product innovation.
D)  should finance more consumption through Social Security and Medicare so that the increased demand encourages greater R&D.E) A) and B)
F) B) and C)

Question 20

Which of the following statements about technological advance is not true?

Accepted Answer

A)  It enhances both productive and allocative efficiency in the society.
B)  It can increase monopoly power through, for example, patents.
C)  It can eventually destroy old existing monopolies.
D)  It progresses automatically and inevitably.E) A) and C)
F) B) and D)

Exam 15: Technology, Rd, and Efficiency

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

Correct Answer
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Correct Answer
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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

Correct Answer
verified

Which of the following supports the contention that pure competitors have a weak incentive to engage in R&D?

Correct Answer
verified

The inverted-U theory of R&D suggests that more R&D spending will be done by oligopolists than by firms producing in the other market structures.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following supports the contention that pure competitors have a strong incentive to engage in R&D?

Correct Answer
verified

(Last Word) Many economists believe that the federal government

Correct Answer
verified

The first commercial introduction of transparent tape is an example of

Correct Answer
verified

The major impact of product innovation tends to be on the firms' revenues, while that of process innovation tends to be on costs.

Correct Answer
verified

R&D spending decisions are complicated because

Correct Answer
verified

Which of the following statements about technological advance is not true?

Correct Answer
verified

In choosing between an old reliable product and a new attractive product, the consumer will

Correct Answer
verified

Technological advance is shown as a(n)

Correct Answer
verified

In the 1800s, railroads broke up the monopoly position of wagons, ships, and barges as the major means of transporting goods.This would be an example of

Correct Answer
verified

Imitation by rivals tends to enhance the profits of the innovating firms.

Correct Answer
verified

The marginal cost to a firm of R&D expenditures is the market interest rate the firm must pay to obtain the needed financing.

Correct Answer
verified

In the inverted-U theory of R&D,

Correct Answer
verified

The technical and scientific characteristics of an industry may be less important than its structure in determining R&D spending and innovation.

Correct Answer
verified

Exam 15: Technology, Rd, and Efficiency

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following supports the contention that pure competitors have a weak incentive to engage in R&D?

Correct AnswerverifiedShow Answer

The inverted-U theory of R&D suggests that more R&D spending will be done by oligopolists than by firms producing in the other market structures.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following supports the contention that pure competitors have a strong incentive to engage in R&D?

Correct AnswerverifiedShow Answer

(Last Word) Many economists believe that the federal government

Correct AnswerverifiedShow Answer

The first commercial introduction of transparent tape is an example of

Correct AnswerverifiedShow Answer

The major impact of product innovation tends to be on the firms' revenues, while that of process innovation tends to be on costs.

Correct AnswerverifiedShow Answer

R&D spending decisions are complicated because

Correct AnswerverifiedShow Answer

Which of the following statements about technological advance is not true?

Correct AnswerverifiedShow Answer

In choosing between an old reliable product and a new attractive product, the consumer will

Correct AnswerverifiedShow Answer

Technological advance is shown as a(n)

Correct AnswerverifiedShow Answer

In the 1800s, railroads broke up the monopoly position of wagons, ships, and barges as the major means of transporting goods.This would be an example of

Correct AnswerverifiedShow Answer

Imitation by rivals tends to enhance the profits of the innovating firms.

Correct AnswerverifiedShow Answer

The marginal cost to a firm of R&D expenditures is the market interest rate the firm must pay to obtain the needed financing.

Correct AnswerverifiedShow Answer

In the inverted-U theory of R&D,

Correct AnswerverifiedShow Answer

The technical and scientific characteristics of an industry may be less important than its structure in determining R&D spending and innovation.

Correct AnswerverifiedShow Answer

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