Deck 5: Technological Progress As Creative Destruction

Question 1

Central to Schumpeter's model of economic growth is:

A) the entrepreneur.
B) an efficient government bureaucracy.
C) the inventor.
D) the working class.

Answer 1

A

Question 2

Joseph Schumpeter's concept of competition is:

A) similar to that in a model of a perfectly competitive market.
B) based on innovation rather than price.
C) mostly competition for government support.
D) accurately described by standard microeconomic models of his time.

Answer 2

B

Question 3

Schumpeter's hypothesis of creative destruction was supported by evidence showing that:

A) most technological progress was the result of accidental discoveries.
B) important inventions and discoveries were the result of profit-seeking behavior.
C) most high-tech industries are perfectly competitive firms.
D) government-funded public research accounted for nearly all new knowledge.

Answer 3

B

Question 4

Among the institutions that are critical for economic growth, Schumpeter included:

A) society's attitude toward business success.
B) little protectionism of existing business interests.
C) unrestricted entry for new businesses.
D) All of the above.
E) None of the above.

Question 5

Joseph Schumpeter is best known for his:

A) AK model.
B) model of creative destruction.
C) learning-by-doing externality model.
D) Investment externality model.

Question 6

An imperfectly competitive producer:

A) has no say in the price of its product and is, essentially, a price taker.
B) faces a horizontal demand curve.
C) supplies its products up to the quantity where the marginal revenue from selling one more product is equal to the marginal cost of producing that last unit.
D) sets the price where the marginal revenue equals the average cost.

Question 7

An imperfectly competitive producer:

A) can potentially earn a profit.
B) faces a downward-sloping demand curve.
C) maximizes profit by setting the price where marginal revenue equals marginal cost.
D) All of the above.
E) None of the above.

Question 8

In the Schumpeterian R&D model of technological progress, the rate of technological progress is:

A) inversely (negatively) related to the amount of productive resources.
B) directly (positively) related to the cost of innovation.
C) directly related to the expected profits from innovation.
D) directly related to the interest rate.
E) All of the above.

Question 9

In the R&D model of technological progress, the rate of technological progress is:

A) directly (positively) related to the amount of productive resources.
B) inversely (negatively) related to the cost of innovation.
C) directly related to the expected profits from innovation.
D) inversely related to the interest rate.
E) All of the above.

Question 10

In the model of an imperfectly competitive market:

A) the marginal revenue curve lies above the demand curve.
B) firms are price-takers who behave as if they are unable to affect the price.
C) producers supply additional output up to the point where marginal revenue equals marginal cost.
D) All of the above.
E) None of the above.

Question 11

Which of the following concepts is not found in the Schumpeterian R&D model:

A) perfect competition.
B) creative destruction.
C) R&D activity that requires inputs of costly, scarce resources..
D) permanent economic growth.
E) endogenous technological progress.

Question 12

In his model of endogenous technological progress based on intentional, costly R&D activity, Paul Romer assumes that:

A) it becomes easier to create new products the more products have already been created.
B) it becomes harder to create new products the more products have already been created.
C) the marginal cost of creating new products is constant over time.
D) it eventually becomes so expensive to create new products that economic growth ceases altogether.

Question 13

Population and economic growth are:

A) directly related according to the Solow model.
B) inversely related according to Schumpeter's model.
C) directly related according to Schumpeter's R&D model.
D) Not related at all in any of the endogenous growth models.

Question 14

Which of the following are conclusions generated by all of the models of endogenous technological progress?

A) Population growth causes growth to slow down.
B) Population size has no effect on technological progress.
C) The larger the population, the faster the rate of technological progress, ceteris paribus.
D) Population growth will slow down as the rate of technological progress accelerates.

Question 15

The speed of technological progress is likely to:

A) slow in the future according to Paul Romer.
B) increase because it is a combinatoric process.
C) diminish in the future because it is a combinatoric process.
D) continue rising in the future because evidence shows the number of patents has been steadily increasing relative to the number of researchers employed.

Question 16

The models of endogenous technological progress usually predict that:

A) population growth causes economic growth to decline.
B) population growth hinders technological progress by reducing the capital-labor ratio.
C) population growth enhances economic growth.
D) All of the above.
E) None of the above.

Question 17

According to Joseph Schumpeter:

A) entrepreneurs prefer self-financing to borrowing from established financial markets.
B) the role of the financial sector of the economy is greatly exaggerated; innovation requires original thinking, not outside financing.
C) financial sectors deflect financing away from innovation and towards established industries.
D) innovation would be nearly impossible without a well-functioning financial sector.

Question 18

Among the characteristics of technology is/are:

A) technological progress is usually the result of intentional, costly activity.
B) technology is often nonrival.
C) technology is often nonexcludable.
D) All of the above.
E) None of the above.

Question 19

Joseph Schumpeter view of competition in the business market revolved around:

A) price competition.
B) technological competition.
C) reputational competition.
D) marketing competition.

Question 20

The cost of innovation curve (CoI) in the Schumpeterian R&D model will shift up (to the left) when:

A) more resources are devoted to innovative activities.
B) the total supply of productive factors and resources increases.
C) the average number of resources needed to produce an innovation rises.
D) profit from innovation increases.

Question 21

The present value of innovation curve (PVI) will shift up when:

A) more resources are devoted to innovative activities.
B) the average number of resources needed to produce an innovation rises.
C) the interest rate increases.
D) there is a reduction in the profit that accrues to innovators.

Question 22

How does a decline in β, the variable that represents the amount of resources needed to generate new technology, impact the Schumpeterian R&D model?

A) Innovations per year increase.
B) Innovations per year decrease.
C) Innovations per year do not change.
D) None of the above.