Question 1

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 valid conclusion can be drawn about the effect and reasons for the change?

Accepted Answer

A)   It improved economic efficiency because more units could be produced at a lower ATC using the same amount of economic resources.
B)   It improved economic efficiency because more units could be produced at a lower ATC using fewer economic resources.
C)   It improved economic efficiency because more units could be produced at the same ATC using fewer economic resources.
D)   It reduced economic efficiency because fewer units could be produced at a higher ATC using more economic resources.E) B) and D)
F) A) and B)

Question 2

A firm's marginal benefit from its R&D expenditures is the

Accepted Answer

A)   total amount spent on its R&D activities.
B)   expected profit from the last dollar spent on R&D.
C)   employment generated by the largest R&D project.
D)   resources bought for all of its R&D activities.E) All of the above
F) A) and D)

Question 3

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 profit and drive them out of the market.
C)   Most purely competitive industries are increasing-cost industries.
D)   Pure competitors are happy to earn only a normal profit.E) A) and D)
F) All of the above

Question 4

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Accepted Answer

A) True 
 B)False

Question 5

According to the inverted-U theory of R&D, other things equal, firms in industries with concentration ratios around 10 percent will be more technologically progressive than firms in industries with 50 percent concentration ratios.

Accepted Answer

A) True 
 B)False

Question 6

Suppose firm X implements a new method for extracting copper from copper-bearing ore. This is an example of

Accepted Answer

A)   product innovation.
B)   process innovation.
C)   economics of scale.
D)   the inverted-U theory.E) C) and D)
F) A) and B)

Question 7

The outcomes from R&D expenditures by firms are

Accepted Answer

A)   always profitable for the firms, if they have the funds available.
B)   the most costly use of funds by the firm.
C)   subject to economies of scale.
D)   expected, but not guaranteed.E) A) and D)
F) B) and C)

Question 8

(Consider This)  The central idea illustrated by the vignette on "catgut" used as violin strings is

Accepted Answer

A)   patent rights.
B)   research and development activity.
C)   derived demand.
D)   trade secrets.E) None of the above
F) A) and C)

Question 9

The "inverted-U theory" of R&D shows the relationship between

Accepted Answer

A)   marginal benefit and marginal cost of R&D.
B)   number of R&D projects and the sources of R&D funds.
C)   R&D expenditures and expected return.
D)   market concentration ratio and R&D expenditures.E) B) and C)
F) A) and C)

Question 10

Which of the following statements is most accurate about business R&D spending in the United States?

Accepted Answer

A)   It is more or less equally distributed between innovation, invention, and basic research.
B)   Well over half is dedicated to innovation and imitation.
C)   The largest share is for basic research, as it provides the foundation, followed by invention and then innovation.
D)   The majority is spent on applied research.E) B) and C)
F) All of the above

Question 11

R&D activities by government and universities have not been an important factor in fostering technological advance.

Accepted Answer

A) True 
 B)False

Question 12

Which would be a good example of a successful introduction of a new product?

Accepted Answer

A)   McDonald's McLean burger
B)   Microsoft Windows
C)   Kodak disc cameras
D)   New Coke by Coca-ColaE) None of the above
F) B) and D)

Question 13

What activity traditionally receives the largest share of total business spending on R&D in the U.S.?

Accepted Answer

A)   invention
B)   development
C)   basic research
D)   applied researchE) All of the above
F) None of the above

Question 14

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 15

Other things equal, trademarks and brand names

Accepted Answer

A)   increase the interest-rate cost of funds used to finance R&D expenditures.
B)   decrease the interest-rate cost of funds used to finance R&D expenditures.
C)   decrease the expected rate of return on R&D expenditures.
D)   increase the expected rate of return on R&D expenditures.E) B) and D)
F) A) and D)

Question 16

Which market structure offers little incentive to engage in R&D?

Accepted Answer

A)   oligopoly
B)   pure monopoly
C)   conglomerates
D)   monopolistic competitionE) All of the above
F) None of the above

Question 17

(Last Word)  The percentage of the U.S. federal budget spent on R&D has

Accepted Answer

A)   risen significantly over the past 50 years.
B)   remained stable over the past 50 years.
C)   declined substantially over the past 50 years.
D)   risen dramatically in the past few years after a steady decline starting in 1980.E) A) and B)
F) A) and C)

Question 18

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) C) and D)
F) All of the above

Question 19

Which of the following are aptly considered entrepreneurs?

Accepted Answer

A)   top executives of a company
B)   government officials
C)   hired managers of banks
D)   those who form start-upsE) All of the above
F) B) and D)

Question 20

Which among the following is the strongest determinant of an industry's technological progressiveness?

Accepted Answer

A)   the scientific character of its industry and the number of technological opportunities available
B)   the size of the industry concentration ratio-the lower the ratio, the greater the firm's technological progressiveness
C)   the Herfindahl index in the firm's industry-the higher the index value, the greater the firm's technological progressiveness
D)   the amount of retained earnings in the industryE) A) and B)
F) A) and C)

Exam 15: Technology, Rd, and Efficiency

Which market structure offers little incentive to engage in R&D?

Correct Answer
verified

Which among the following is the strongest determinant of an industry's technological progressiveness?

Correct Answer
verified

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Correct Answer
verified

The "inverted-U theory" of R&D shows the relationship between

Correct Answer
verified

A firm's marginal benefit from its R&D expenditures is the

Correct Answer
verified

Other things equal, trademarks and brand names

Correct Answer
verified

According to the inverted-U theory of R&D, other things equal, firms in industries with concentration ratios around 10 percent will be more technologically progressive than firms in industries with 50 percent concentration ratios.

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

What activity traditionally receives the largest share of total business spending on R&D in the U.S.?

Correct Answer
verified

Which would be a good example of a successful introduction of a new product?

Correct Answer
verified

(Consider This) The central idea illustrated by the vignette on "catgut" used as violin strings is

Correct Answer
verified

Suppose firm X implements a new method for extracting copper from copper-bearing ore. This is an example of

Correct Answer
verified

The outcomes from R&D expenditures by firms are

Correct Answer
verified

R&D activities by government and universities have not been an important factor in fostering technological advance.

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

(Last Word) The percentage of the U.S. federal budget spent on R&D has

Correct Answer
verified

Correct Answer
verified

Which of the following statements is most accurate about business R&D spending in the United States?

Correct Answer
verified

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

Correct Answer
verified

Which of the following are aptly considered entrepreneurs?

Correct Answer
verified

Exam 15: Technology, Rd, and Efficiency

Which market structure offers little incentive to engage in R&D?

Correct AnswerverifiedShow Answer

Which among the following is the strongest determinant of an industry's technological progressiveness?

Correct AnswerverifiedShow Answer

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Correct AnswerverifiedShow Answer

The "inverted-U theory" of R&D shows the relationship between

Correct AnswerverifiedShow Answer

A firm's marginal benefit from its R&D expenditures is the

Correct AnswerverifiedShow Answer

Other things equal, trademarks and brand names

Correct AnswerverifiedShow Answer

According to the inverted-U theory of R&D, other things equal, firms in industries with concentration ratios around 10 percent will be more technologically progressive than firms in industries with 50 percent concentration ratios.

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

What activity traditionally receives the largest share of total business spending on R&D in the U.S.?

Correct AnswerverifiedShow Answer

Which would be a good example of a successful introduction of a new product?

Correct AnswerverifiedShow Answer

(Consider This) The central idea illustrated by the vignette on "catgut" used as violin strings is

Correct AnswerverifiedShow Answer

Suppose firm X implements a new method for extracting copper from copper-bearing ore. This is an example of

Correct AnswerverifiedShow Answer

The outcomes from R&D expenditures by firms are

Correct AnswerverifiedShow Answer

R&D activities by government and universities have not been an important factor in fostering technological advance.

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

(Last Word) The percentage of the U.S. federal budget spent on R&D has

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements is most accurate about business R&D spending in the United States?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following are aptly considered entrepreneurs?

Correct AnswerverifiedShow Answer

Correct Answer
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