Question 1

Labor productivity refers to the total amount of output a worker produces in some period of time (an hour, a week, a month, a year).

Accepted Answer

A) True 
 B)False  True

Question 2

Average growth rates of per capita income were close to zero, on average, prior to the Industrial Revolution.

Accepted Answer

A) True 
 B)False  True

Question 3

Most innovations in the economy come from

Accepted Answer

A)  many different industries in a few countries. 
B)  a few industries in many different countries. 
C)  many different industries in many different countries. 
D)  a few industries in a few countries. 
E)  a few industries in the United States. 
A)  many different industries in a few countries. 
B)  a few industries in many different countries. 
C)  many different industries in many different countries. 
D)  a few industries in a few countries. 
E)  a few industries in the United States. D

Question 4

Explain the three growth-creating properties of innovation.

Accepted Answer

1.Innovation can create cumulative chang

Question 5

One of the reasons for the growth performance of free market economies is firms' use of innovation to compete with one another.

Accepted Answer

A) True 
 B)False

Question 6

What are the likely effects of a successful process innovation on a monopolist's level of output and price of its product? You may wish to use a diagram to illustrate your answer.

Accepted Answer

A process innovation is an innovation th

Question 7

Patents are granted as a way of providing incentives for private firms to innovate, in recognition of the enormous social benefits generated from innovation.

Accepted Answer

A) True 
 B)False

Question 8

All of the following are features of innovation that magnify its contribution to GDP growth, except

Accepted Answer

A)  that many innovations create cumulative changes. 
B)  the benefits of innovation are captured entirely by the individual/firm funding the innovation. 
C)  that innovation has a public goods property. 
D)  innovations act like an accelerator. 
A)  that many innovations create cumulative changes. 
B)  the benefits of innovation are captured entirely by the individual/firm funding the innovation. 
C)  that innovation has a public goods property. 
D)  innovations act like an accelerator.

Question 9

The presence of externalities in the acquisition of new technical knowledge means that the free market will tend to devote too many resources to this activity.

Accepted Answer

A) True 
 B)False

Question 10

A profit-maximizing monopoly will spend on a process innovation

Accepted Answer

A) up to the point where P = MC. B) up to the point where P = AC. C) anywhere where MR >MC. D) up to the point where MR = MC. E) anywhere where MRMC. D) up to the point where MR = MC. E) anywhere where MR

Question 11

Given the severe externality problems associated with basic research, governments rather than private firms tend to finance such research.

Accepted Answer

A) True 
 B)False

Question 12

The prime engine of growth in market economies is

Accepted Answer

A)  government spending. 
B)  consumer spending. 
C)  innovation. 
D)  private saving. 
E)  public saving. 
A)  government spending. 
B)  consumer spending. 
C)  innovation. 
D)  private saving. 
E)  public saving.

Question 13

In many high-tech industries in the economy, such as computers, medical equipment, and automobiles

Accepted Answer

A)  price competition is utilized by firms more than innovation to compete with rivals. 
B)  firms compete on the basis of innovation only; never engaging in price competition. 
C)  innovation is utilized by firms to compete with rivals more than price competition. 
D)  firms use price competition only; never engaging in innovation to compete with rivals. 
E)  firms utilize innovation and price competition equally to compete with rivals. 
A)  price competition is utilized by firms more than innovation to compete with rivals. 
B)  firms compete on the basis of innovation only; never engaging in price competition. 
C)  innovation is utilized by firms to compete with rivals more than price competition. 
D)  firms use price competition only; never engaging in innovation to compete with rivals. 
E)  firms utilize innovation and price competition equally to compete with rivals.

Question 14

There is assumed to be a "ratchet" effect when it comes to firms in an industry and their spending on R&D.Explain what it is about the market economy that produces that effect.

Accepted Answer

A ratchet is an arrangement that permits

Question 15

Describe the profit-maximizing firm's decision about how much to spend on innovation.

Accepted Answer

The profit-maximizing firm will decide h

Question 16

The story of innovation battles among firms is analogous to the story of armaments races among countries.

Accepted Answer

A) True 
 B)False

Question 17

Research and development refers to the activity of firms, universities, and government agencies that seek to invent new products and processes.

Accepted Answer

A) True 
 B)False

Question 18

Profit-maximizing firms will choose a level of spending on research and development, in the short run, where the

Accepted Answer

A)  marginal revenue from R&D is maximized. 
B)  total revenue from R&D is maximized. 
C)  marginal revenue from R&D is greater than its marginal cost. 
D)  marginal cost of R&D is minimized. 
E)  marginal revenue from R&D is equal to its marginal cost. 
A)  marginal revenue from R&D is maximized. 
B)  total revenue from R&D is maximized. 
C)  marginal revenue from R&D is greater than its marginal cost. 
D)  marginal cost of R&D is minimized. 
E)  marginal revenue from R&D is equal to its marginal cost.

Question 19

Most innovations come from just a few large industries.

Accepted Answer

A) True 
 B)False

Question 20

How do modern markets differ from other economic systems in their capacity to produce "growth miracles"?

Accepted Answer

While other societies have had spectacul

Exam 16: The Market's Prime Achievement: Innovation and Growth

Labor productivity refers to the total amount of output a worker produces in some period of time (an hour, a week, a month, a year).

Average growth rates of per capita income were close to zero, on average, prior to the Industrial Revolution.

Most innovations in the economy come from

Explain the three growth-creating properties of innovation.

One of the reasons for the growth performance of free market economies is firms' use of innovation to compete with one another.

What are the likely effects of a successful process innovation on a monopolist's level of output and price of its product? You may wish to use a diagram to illustrate your answer.

Patents are granted as a way of providing incentives for private firms to innovate, in recognition of the enormous social benefits generated from innovation.

All of the following are features of innovation that magnify its contribution to GDP growth, except

The presence of externalities in the acquisition of new technical knowledge means that the free market will tend to devote too many resources to this activity.

A profit-maximizing monopoly will spend on a process innovation

Given the severe externality problems associated with basic research, governments rather than private firms tend to finance such research.

The prime engine of growth in market economies is

In many high-tech industries in the economy, such as computers, medical equipment, and automobiles

There is assumed to be a "ratchet" effect when it comes to firms in an industry and their spending on R&D.Explain what it is about the market economy that produces that effect.

Describe the profit-maximizing firm's decision about how much to spend on innovation.

The story of innovation battles among firms is analogous to the story of armaments races among countries.

Research and development refers to the activity of firms, universities, and government agencies that seek to invent new products and processes.

Profit-maximizing firms will choose a level of spending on research and development, in the short run, where the

Most innovations come from just a few large industries.

How do modern markets differ from other economic systems in their capacity to produce "growth miracles"?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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