Question 1

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.E) B) and D)
F) A) and B)

Question 2

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

Question 3

In encouraging R&D and invention, patents are most necessary

Accepted Answer

A)  in industries with complicated products that are hard to copy and market.
B)  in industries with simple products that are easy to copy and market.
C)  in purely competitive industries.
D)  for stopping infringement lawsuits.E) B) and D)
F) C) and D)

Question 4

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

Question 5

Refer to the data for a consumer whose income = $12. Assume new product Z is introduced. How many units of Z will this consumer buy, given his or her $12 budget?

Accepted Answer

A)  6 units
B)  4 units
C)  2 units
D)  0 unitsE) A) and C)
F) None of the above

Question 6

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 the other answers are correct.E) B) and D)
F) B) and C)

Question 7

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

Accepted Answer

A)  number of firms in the industry.
B)  length of time for government patents.
C)  scientific character of the industry.
D)  imitation problem in the industry.E) B) and C)
F) A) and B)

Question 8

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.E) A) and B)
F) B) and D)

Question 9

All inventors are entrepreneurs.

Accepted Answer

A) True 
 B)False

Question 10

Entrepreneurs

Accepted Answer

A)  include everyone engaged in R&D work.
B)  are located in small enterprises only.
C)  differ from other innovators because of the risks entrepreneurs must bear.
D)  work exclusively in government and university R&D laboratories.E) C) and D)
F) B) and C)

Question 11

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.E) All of the above
F) B) and C)

Question 12

A common way by which governments encourage invention is by providing the inventor with a

Accepted Answer

A)  patent.
B)  copyright.
C)  trade secret.
D)  trademark.E) A) and B)
F) A) and C)

Question 13

In the diagram, at $60 million of R&D expenditure, the

Accepted Answer

A)  expected rate of return exceeds the interest-rate cost of funds.
B)  firm is spending an optimal amount on R&D.
C)  interest-rate cost of funds exceeds the expected rate of return.
D)  expected rate of return on R&D is negative.E) None of the above
F) B) and C)

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

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC₁ to ATC₂?

Accepted Answer

A)  replacement of old equipment with new, more productive equipment embodying technological advance
B)  a decrease in the incomes of A's customers
C)  a move along A's total product curve (not shown) 
D)  the increase in the price of one of the major inputs used to produce A's productE) B) and D)
F) B) and C)

Question 16

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

Question 17

The table shows the marginal utility schedules for old product X and new product Y for a hypothetical consumer. The price of X is $4, and the price of good Y is $3. The budget of the consumer is $12. If the consumer can only buy old product X, how much will the consumer buy and what will be the total utility from spending the given budget?

Accepted Answer

A)  4X and 42
B)  3X and 12
C)  5X and 60
D)  3X and 42E) B) and C)
F) None of the above

Question 18

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds falls from 10 percent to 6 percent. What will happen to the optimal amount of R&D spending?

Accepted Answer

A)  It increases from $24 billion to $36 billion.
B)  It increases from $24 billion to $42 billion.
C)  It decreases from $36 billion to $24 billion.
D)  It decreases from $42 billion to $24 billion.E) A) and D)
F) None of the above

Question 19

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 20

If an entrepreneur uses personal funds, is there a cost for financing?

Accepted Answer

Yes, there is an opportunity c...

Exam 15: Technology, RD, and Efficiency

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

Correct Answer
verified

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

Refer to the data for a consumer whose income = $12. Assume new product Z is introduced. How many units of Z will this consumer buy, given his or her $12 budget?

Correct Answer
verified

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

Correct Answer
verified

Entrepreneurs

Correct Answer
verified

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds falls from 10 percent to 6 percent. What will happen to the optimal amount of R&D spending?

Correct Answer
verified

If an entrepreneur uses personal funds, is there a cost for financing?

Correct Answer
verified
Yes, there is an opportunity c...
View Answer

In the diagram, at $60 million of R&D expenditure, the

Correct Answer
verified

In encouraging R&D and invention, patents are most necessary

Correct Answer
verified

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC₁ to ATC₂?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Consumer acceptance of a new product depends on

Correct Answer
verified

All inventors are entrepreneurs.

Correct Answer
verified

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

Correct Answer
verified

A common way by which governments encourage invention is by providing the inventor with a

Correct Answer
verified

Technological advance is a three-step process of

Correct Answer
verified

Exam 15: Technology, RD, and Efficiency

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

Correct AnswerverifiedShow Answer

Besides market structure, another factor that seems to influence the level of R&D spending in an industry is the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Refer to the data for a consumer whose income = $12. Assume new product Z is introduced. How many units of Z will this consumer buy, given his or her $12 budget?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Entrepreneurs

Correct AnswerverifiedShow Answer

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds falls from 10 percent to 6 percent. What will happen to the optimal amount of R&D spending?

Correct AnswerverifiedShow Answer

If an entrepreneur uses personal funds, is there a cost for financing?

Correct AnswerverifiedYes, there is an opportunity c...View AnswerShow Answer

In the diagram, at $60 million of R&D expenditure, the

Correct AnswerverifiedShow Answer

In encouraging R&D and invention, patents are most necessary

Correct AnswerverifiedShow Answer

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC₁ to ATC₂?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Consumer acceptance of a new product depends on

Correct AnswerverifiedShow Answer

All inventors are entrepreneurs.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A common way by which governments encourage invention is by providing the inventor with a

Correct AnswerverifiedShow Answer

Technological advance is a three-step process of

Correct AnswerverifiedShow Answer

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Correct Answer
verified

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verified
Yes, there is an opportunity c...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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