Question 1

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) A) and D)
F) B) and C)

Question 2

The modern view of technological advance is that it is an external force to which the economy adjusts.

Accepted Answer

A) True 
 B)False

Question 3

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

Question 4

The profit-enhancing impact of process innovation tends to be on all of the following, except

Accepted Answer

A)  the firm's TP or MP curves.
B)  the firm's MR curve.
C)  the firm's cost curves.
D)  the firm's productivity.E) A) and D)
F) B) and C)

Question 5

In analyzing a market, the time horizon where technology can change and firms can offer new products is referred to as the

Accepted Answer

A)  short run.
B)  very short run.
C)  long run.
D)  very long run.E) A) and D)
F) None of the above

Question 6

When corporations use retained earnings to finance the R&D for a new venture, the marginal cost of financing is zero.

Accepted Answer

A) True 
 B)False

Question 7

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 B)
F) B) and C)

Question 8

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

Question 9

According to the inverted-U theory, R&D expenditures as a percentage of sales tend to be relatively low in

Accepted Answer

A)  low-concentration industries only
B)  high-concentration industries only
C)  low- and high-concentration industries
D)  low- to middle-concentration industriesE) A) and B)
F) A) and C)

Question 10

Firms have several sources of funds to finance their R&D activities, including the following, except

Accepted Answer

A)  loans obtained from banks and bondholders.
B)  retained earnings or corporate savings.
C)  venture capital and personal savings.
D)  anticipated profits from forthcoming new products.E) None of the above
F) A) and B)

Question 11

Process innovation leads to technological advance because it

Accepted Answer

A)  decreases total product.
B)  increases average total costs.
C)  decreases productive efficiency.
D)  increases productive efficiency.E) None of the above
F) A) and D)

Question 12

We know with certainty that a consumer will buy a newly introduced product rather than an existing product when the

Accepted Answer

A)  MU/P of the new product exceeds the MU/P of the existing product.
B)  price of the new product is less than the price of the existing product.
C)  MU of the new product is more than the MU of the existing product.
D)  law of diminishing marginal utility applies to the existing product.E) None of the above
F) A) and B)

Question 13

Compared to the mid-1960s, the percentage of the U.S.Federal budget spent on R&D in recent years is

Accepted Answer

A)  about the same.
B)  much smaller.
C)  slightly bigger.
D)  much bigger.E) B) and C)
F) B) and D)

Question 14

When economists view technological change as internal to the economy, they mean that it

Accepted Answer

A)  occurs randomly.
B)  occurs accidentally.
C)  arises deliberately from the profit motive and competition.
D)  arises mainly from government subsidies.E) C) and D)
F) All of the above

Question 15

Which would be an example of innovation within an existing business firm?

Accepted Answer

A)  the development of Post-it note pads by the 3M Corporation
B)  the granting of a patent to a university researcher
C)  the formation of the start-up firm Amgen
D)  the merger of AOL and Time-WarnerE) All of the above
F) A) and B)

Question 16

Which market structure has a strong incentive for product development and differentiation?

Accepted Answer

A)  monopolistic competition
B)  pure competition
C)  pure monopoly
D)  oligopolyE) B) and C)
F) A) and C)

Question 17

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) B) and D)
F) A) and C)

Question 18

Venture capital is another name for retained earnings.

Accepted Answer

A) True 
 B)False

Question 19

One of the major advantages of being the first to develop a product is

Accepted Answer

A)  an increase in the average total cost of production.
B)  less need for legal protection for the product.
C)  the opportunity to be bought out for a profit.
D)  the ability to use the fast-second strategy.E) All of the above
F) None of the above

Question 20

Venture capital refers to

Accepted Answer

A)  equipment and factories.
B)  financing for start-ups.
C)  entrepreneurs who start businesses.
D)  creative destruction in capitalism.E) B) and C)
F) B) and D)

Exam 15: Technology, Rd, and Efficiency

In analyzing a market, the time horizon where technology can change and firms can offer new products is referred to as the

Correct AnswerverifiedShow Answer

One of the major advantages of being the first to develop a product is

Correct AnswerverifiedShow Answer

Which market structure has a strong incentive for product development and differentiation?

Correct AnswerverifiedShow Answer

We know with certainty that a consumer will buy a newly introduced product rather than an existing product when the

Correct AnswerverifiedShow Answer

When corporations use retained earnings to finance the R&D for a new venture, the marginal cost of financing is zero.

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

The outcomes from R&D expenditures by firms are

Correct AnswerverifiedShow Answer

Firms have several sources of funds to finance their R&D activities, including the following, except

Correct AnswerverifiedShow Answer

Process innovation leads to technological advance because it

Correct AnswerverifiedShow Answer

Venture capital is another name for retained earnings.

Correct AnswerverifiedShow Answer

Venture capital refers to

Correct AnswerverifiedShow Answer

The profit-enhancing impact of process innovation tends to be on all of the following, except

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which would be an example of innovation within an existing business firm?

Correct AnswerverifiedShow Answer

Compared to the mid-1960s, the percentage of the U.S.Federal budget spent on R&D in recent years is

Correct AnswerverifiedShow Answer

According to the inverted-U theory, R&D expenditures as a percentage of sales tend to be relatively low in

Correct AnswerverifiedShow Answer

Technological advance improves allocative efficiency by

Correct AnswerverifiedShow Answer

When economists view technological change as internal to the economy, they mean that it

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

The modern view of technological advance is that it is an external force to which the economy adjusts.

Correct AnswerverifiedShow Answer

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