Question 1

The more money firms spend on R&D the faster the economy is expected to grow.

Accepted Answer

A) True 
 B)False  True

Question 2

Do free markets spend enough on R&D activities? Explain your answer.

Accepted Answer

Free markets will generate enough spending on R&D activities because those activities generate positive externalities.That means the benefits from innovation are not captured solely by the firm investing in the innovation.Since private firms make decisions on R&D spending on the basis of the private benefits and costs,and since the social benefits are greater than the private benefits,private firms will spend less than the socially optimal amount on R&D.

Question 3

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 4

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 5

Spending on innovation can be modeled in terms of a kinked marginal revenue curve.Explain what this model predicts about how rivals will react to a firm increasing its spending on innovation compared with decreasing its spending,and how that affects the firm's revenues.

Accepted Answer

The kinked MR curve (Z shaped)shows that

Question 6

The unprecedented increase in living standards in the industrialized countries over the last two centuries is the result of

Accepted Answer

A) growth in productivity of land. 
B) growth in labor productivity. 
C) growth in output. 
D) population growth. 
E) growth in government spending. 
A) growth in productivity of land. 
B) growth in labor productivity. 
C) growth in output. 
D) population growth. 
E) growth in government spending.

Question 7

In the United States,the financing for innovation has been increasingly supplied by

Accepted Answer

A) large oligopolistic enterprises. 
B) independent inventors 
C) newly founded entrepreneurial firms. 
D) small enterprises. 
A) large oligopolistic enterprises. 
B) independent inventors 
C) newly founded entrepreneurial firms. 
D) small enterprises.

Question 8

Any arrangement in which a firm voluntarily makes its privately owned technology available to other firms in exchange for access to the technology of the second company,or for payment of an agreed-upon fee,is defined as

Accepted Answer

A) cross licensing of patents 
B) technology trading 
C) process innovation. 
D) a ratchet. 
E) product innovation. 
A) cross licensing of patents 
B) technology trading 
C) process innovation. 
D) a ratchet. 
E) product innovation.

Question 9

"Pricing the product of a firm with high and continuing R&D costs at marginal cost is recipe for financial suicide".Do you agree with this statement?

Accepted Answer

Yes,because a firm is not expected to co

Question 10

A firm will decide how much to spend on research and development in the same way that it decides how much output to produce: by equating marginal cost and marginal revenue.

Accepted Answer

A) True 
 B)False

Question 11

In 2008,spending on research and innovation represented approximately 2.8 percent of total GDP.

Accepted Answer

A) True 
 B)False

Question 12

____ of patents occurs when each of two firms agrees to let the other use some specified set of its patents,either at a price specified in their agreement or in return for access to the other firm's patents.

Accepted Answer

A) Cross licensing 
B) Technology trading 
C) Process innovation 
D) Ratcheting 
A) Cross licensing 
B) Technology trading 
C) Process innovation 
D) Ratcheting

Question 13

Per-capita income in an economy

Accepted Answer

A) is the net income of that economy. 
B) is the average income of all people in that economy. 
C) is the difference between exports and imports in that economy. 
D) is the difference between earnings and consumption of all people in that economy. 
A) is the net income of that economy. 
B) is the average income of all people in that economy. 
C) is the difference between exports and imports in that economy. 
D) is the difference between earnings and consumption of all people in that economy.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

The process by which new product or production methods are introduced is called the Industrial Revolution.

Accepted Answer

A) True 
 B)False

Question 16

Patents are granted to provide incentives for private firms to innovate.

Accepted Answer

A) True 
 B)False

Question 17

Technology trading is an arrangement where firms are forced to provide their technology to other firms.

Accepted Answer

A) True 
 B)False

Question 18

The "new economy" refers to a world in which computer use is widespread,information is quickly transmitted,and technical change is rapid.

Accepted Answer

A) True 
 B)False

Question 19

All of the following are examples of technology sharing except

Accepted Answer

A) technology trading. 
B) cross licensing of patents. 
C) research joint ventures. 
D) applying for a patent. 
E) firms in an industry pooling resources to pay for R&D to develop a process innovation. 
A) technology trading. 
B) cross licensing of patents. 
C) research joint ventures. 
D) applying for a patent. 
E) firms in an industry pooling resources to pay for R&D to develop a process innovation.

Question 20

Provide examples of efforts undertaken by large businesses to contain the risks inherent in the innovation process.

Accepted Answer

Large business firms have tended to slan

Exam 16: The Markets Prime Achievement: Innovation and Growth

The more money firms spend on R&D the faster the economy is expected to grow.

Do free markets spend enough on R&D activities? Explain your answer.

A profit-maximizing monopoly will spend on a process innovation

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

Spending on innovation can be modeled in terms of a kinked marginal revenue curve.Explain what this model predicts about how rivals will react to a firm increasing its spending on innovation compared with decreasing its spending,and how that affects the firm's revenues.

The unprecedented increase in living standards in the industrialized countries over the last two centuries is the result of

In the United States,the financing for innovation has been increasingly supplied by

Any arrangement in which a firm voluntarily makes its privately owned technology available to other firms in exchange for access to the technology of the second company,or for payment of an agreed-upon fee,is defined as

"Pricing the product of a firm with high and continuing R&D costs at marginal cost is recipe for financial suicide".Do you agree with this statement?

A firm will decide how much to spend on research and development in the same way that it decides how much output to produce: by equating marginal cost and marginal revenue.

In 2008,spending on research and innovation represented approximately 2.8 percent of total GDP.

____ of patents occurs when each of two firms agrees to let the other use some specified set of its patents,either at a price specified in their agreement or in return for access to the other firm's patents.

Per-capita income in an economy

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

The process by which new product or production methods are introduced is called the Industrial Revolution.

Patents are granted to provide incentives for private firms to innovate.

Technology trading is an arrangement where firms are forced to provide their technology to other firms.

The "new economy" refers to a world in which computer use is widespread,information is quickly transmitted,and technical change is rapid.

All of the following are examples of technology sharing except

Provide examples of efforts undertaken by large businesses to contain the risks inherent in the innovation process.

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

International Trade and Comparative Advantage

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