Question 1

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) B) and C)
F) None of the above

Question 2

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

Accepted Answer

A)  not undertake the R&D expenditure if its interest-rate cost of borrowing is 8 percent.
B)  undertake the R&D expenditure if its interest-rate cost of borrowing is 12 percent.
C)  undertake the R&D expenditure if its interest-rate cost of borrowing is 20 percent.
D)  undertake the R&D expenditure if its interest-rate cost of borrowing is 9 percent.E) A) and B)
F) A) and C)

Question 3

Refer to the diagram, which relates to Firm A. Which of the following would shift A's average total cost curve from ATC ₁ to ATC ₂?

Accepted Answer

A)  an increase in the price of a key component used by A in producing its product
B)  a decrease in the incomes of A's customers
C)  a move along A's total product curve (not shown) 
D)  an improved production method that shifts A's total product curve upwardE) All of the above
F) None of the above

Question 4

Refer to the data for a consumer whose income = $14. Suppose the price of new product Z is $2 rather than $1. This consumer would purchase

Accepted Answer

A)  four units of Z.
B)  three units of Z.
C)  six units of Z.
D)  more of X, Y, and Z than if the price were $1 for Z.E) B) and C)
F) B) and D)

Question 5

The following are examples of technological breakthroughs that came out of a government or university laboratory, except

Accepted Answer

A)  the Internet.
B)  genetic engineering.
C)  hybrid seeds.
D)  disposable contact lenses.E) C) and D)
F) B) and C)

Question 6

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

Accepted Answer

A) True 
 B)False

Question 7

If we plotted the given data on a graph with R&D expenditures on the horizontal axis, the

Accepted Answer

A)  interest-rate cost-of-funds curve would be a vertical line.
B)  interest-rate cost-of-funds curve would be a horizontal line.
C)  expected-rate-of-return curve would slope upward.
D)  expected-rate-of-return curve would be a horizontal line.E) A) and C)
F) A) and D)

Question 8

The table shows the rate of return and R&D spending for a hypothetical firm. Assume the interest-rate cost of funds is 7 percent. What is the optimal amount of R&D expenditures?

Accepted Answer

A)  $30 billion
B)  $42 billion
C)  $36 billion
D)  $48 billionE) A) and B)
F) None of the above

Question 9

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

Accepted Answer

A)  Entry to monopolistic competitive industries is relatively easy, and thus profit from innovation is quickly competed away.
B)  Most monopolistic competitive industries are decreasing-cost industries.
C)  The desire to differentiate products from competitors may motivate monopolistic competitors to engage in R&D.
D)  Monopolistic competitors have large retained earnings that are available to finance R&D.E) B) and D)
F) A) and B)

Exam 15: Technology, RD, and Efficiency

If we plotted the given data on a graph with R&D expenditures on the horizontal axis, the

Correct Answer
verified

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

Correct Answer
verified

The following are examples of technological breakthroughs that came out of a government or university laboratory, except

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 is 7 percent. What is the optimal amount of R&D expenditures?

Correct Answer
verified

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

Correct Answer
verified

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

Correct Answer
verified

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

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 ATC ₁ to ATC ₂?

Correct Answer
verified

Refer to the data for a consumer whose income = $14. Suppose the price of new product Z is $2 rather than $1. This consumer would purchase

Correct Answer
verified

Exam 15: Technology, RD, and Efficiency

If we plotted the given data on a graph with R&D expenditures on the horizontal axis, the

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The following are examples of technological breakthroughs that came out of a government or university laboratory, except

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 is 7 percent. What is the optimal amount of R&D expenditures?

Correct AnswerverifiedShow Answer

The process by which new firms and new products destroy existing dominant firms and their products is called creative destruction.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Suppose a firm anticipates that a particular R&D expenditure of $20 million will result in a new product and thus create a one-time added profit of $22 million a year later. The firm will

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 ATC ₁ to ATC ₂?

Correct AnswerverifiedShow Answer

Refer to the data for a consumer whose income = $14. Suppose the price of new product Z is $2 rather than $1. This consumer would purchase

Correct AnswerverifiedShow Answer

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