Question 1

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

Question 2

Entrepreneurs often form new small firms called "spin-off firms."

Accepted Answer

A) True 
 B)False

Question 3

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

Question 4

In economists' models, technological advance occurs in

Accepted Answer

A)  the very long run.
B)  either the short run, long run, or very long run.
C)  manufacturing industries but not in service industries.
D)  pure competition but not in monopolistic competition, oligopoly, and pure monopoly.E) B) and C)
F) A) and D)

Question 5

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 productE) A) and D)
F) None of the above

Question 6

List and describe the two types of innovation.

Accepted Answer

There are two types of innovation, produ...

Question 7

Creative destruction is

Accepted Answer

A)  the process by which large firms buy up small firms.
B)  the process by which new firms and new products replace existing dominant firms and products.
C)  a term coined many years ago by Adam Smith.
D)  applicable to planned economies but not to market economies.E) None of the above
F) All of the above

Question 8

Refer to the data for a consumer whose income = $12. In equilibrium, the introduction of new product Z has increased this consumer's total utility by

Accepted Answer

A)  54 utils.
B)  42 utils.
C)  60 utils.
D)  66 utils.E) All of the above
F) A) and D)

Question 9

Do economists believe that patents should be eliminated on some types of products? Explain.

Accepted Answer

Yes, some economists believe the net ben...

Question 10

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; patentsE) B) and C)
F) C) and D)

Question 11

Suppose that a firm successfully introduces a highly profitable new product. If this new product is priced higher than existing substitute products, then the

Accepted Answer

A)  new product has greater marginal utility than the existing products.
B)  laws of economics have been violated.
C)  new product must have increasing, not diminishing, marginal utility.
D)  existing products were unprofitable to produce.E) A) and D)
F) B) and C)

Question 12

The process by which new firms and new products replace existing dominant firms and products is called

Accepted Answer

A)  monopolistic competition.
B)  the inverted-U process.
C)  process innovation.
D)  creative destruction.E) A) and D)
F) A) and C)

Question 13

1 to ATC2.	 B) shift ATC2 to ATC1. C) change output from Q1 to Q2. D) change output from Q2 to Q1. " class="answers-bank-image d-inline" rel="preload" > Refer to the diagram. Process innovation will tend to

Accepted Answer

A)  shift ATC1 to ATC2.	
B)  shift ATC2 to ATC1.
C)  change output from Q1 to Q2.
D)  change output from Q2 to Q1.E) B) and D)
F) B) and C)

Question 14

In the graph, the optimal amount of R&D spending and the interest-rate cost-of-funds at that optimal level would be, respectively,

Accepted Answer

A)  $10 million and 9 percent.
B)  $10 million and 13 percent.
C)  $30 million and 9 percent.
D)  $50 million and 6 percent.E) B) and C)
F) A) and B)

Question 15

In exchange for a share of ZYX's profits if it succeeds, Firm ABC provides development funds to newly formed ZYX, which is developing an innovative product. ABC funds are called ____________, while ZYX is known as a ____________.

Accepted Answer

A)  venture capital; start-up
B)  retained earnings; entrepreneurial firm
C)  mutual funds; start-up
D)  transfer payments; entrepreneurial firmE) None of the above
F) C) and D)

Question 16

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 monopolistsE) B) and C)
F) All of the above

Question 17

Refer to the data for a consumer whose income = $6. In equilibrium, the introduction of new product Z has increased this consumer's total utility by

Accepted Answer

A)  24 utils.
B)  98 utils.
C)  74 utils.
D)  14 utils.E) A) and B)
F) A) and C)

Question 18

An industry with which of the following four-firm concentration ratios would tend to have the greatest amount of R&D expenditures as a percentage of sales?

Accepted Answer

A)  0
B)  10
C)  50
D)  100E) None of the above
F) A) and B)

Question 19

Which of the following is a "spin-off" firm?

Accepted Answer

A)  Amazon
B)  Yum! Brands
C)  McDonald's
D)  PepsiE) A) and B)
F) A) and C)

Question 20

Refer to the data. At $40 million of R&D expenditures, the

Accepted Answer

A)  marginal cost of R&D exceeds the marginal benefit.
B)  marginal benefit of R&D exceeds the marginal cost.
C)  expected rate of return from R&D is negative.
D)  firm has exceeded its affordable level of R&D.E) A) and C)
F) A) and B)

Exam 15: Technology, RD, and Efficiency

List and describe the two types of innovation.

Correct AnswerverifiedThere are two types of innovation, produ...View AnswerShow Answer

An industry with which of the following four-firm concentration ratios would tend to have the greatest amount of R&D expenditures as a percentage of sales?

Correct AnswerverifiedShow Answer

Refer to the diagram. Process innovation will tend to

Correct AnswerverifiedShow Answer

Suppose that a firm successfully introduces a highly profitable new product. If this new product is priced higher than existing substitute products, then the

Correct AnswerverifiedShow Answer

Do economists believe that patents should be eliminated on some types of products? Explain.

Correct AnswerverifiedYes, some economists believe the net ben...View AnswerShow Answer

Creative destruction is

Correct AnswerverifiedShow Answer

Which of the following does not aptly describe innovation?

Correct AnswerverifiedShow Answer

Entrepreneurs often form new small firms called "spin-off firms."

Correct AnswerverifiedShow Answer

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 __________.

Correct AnswerverifiedShow Answer

Which of the following is a "spin-off" firm?

Correct AnswerverifiedShow Answer

In exchange for a share of ZYX's profits if it succeeds, Firm ABC provides development funds to newly formed ZYX, which is developing an innovative product. ABC funds are called ____________, while ZYX is known as a ____________.

Correct AnswerverifiedShow Answer

In the graph, the optimal amount of R&D spending and the interest-rate cost-of-funds at that optimal level would be, respectively,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the data for a consumer whose income = $6. In equilibrium, the introduction of new product Z has increased this consumer's total utility by

Correct AnswerverifiedShow Answer

The process by which new firms and new products replace existing dominant firms and products is called

Correct AnswerverifiedShow Answer

Refer to the data. At $40 million of R&D expenditures, the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In economists' models, technological advance occurs in

Correct AnswerverifiedShow Answer

Refer to the data for a consumer whose income = $12. In equilibrium, the introduction of new product Z has increased this consumer's total utility by

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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There are two types of innovation, produ...
View Answer

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Yes, some economists believe the net ben...
View Answer

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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 __.

Correct Answer
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In exchange for a share of ZYX's profits if it succeeds, Firm ABC provides development funds to newly formed ZYX, which is developing an innovative product. ABC funds are called , while ZYX is known as a .

Correct Answer
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