Deck 15: Technological Change

Question 1

A patent allows the inventor to prevent others from making or selling an invention for a period of years to encourage innovation.

Answer 1

True
Explanation: Except with the permission of the holder of the patent, no one else can use an invention until the patent expires.

Question 2

The immigration of skilled scientists and engineers from other nations pushes the supply schedule for innovation to the right,increasing the amount of innovation.

Answer 2

True
Explanation: An increase in the supply of scientists and engineers increases the number of people who can do research, increasing the supply of innovation.

Question 3

The immigration of skilled scientists and engineers from other nations raises the wages of scientists and engineers.

Answer 3

False
Explanation: Immigration of scientists and engineers pushes the supply curve for engineers and scientists to the right, lowering the equilibrium wage.

Question 4

Technological improvements are generally harmful to society because new machines replace human beings,causing increased unemployment.

Question 5

The supply curve for innovative activities tells us the quantity of innovative activities supplied,given their price.

Question 6

Why are the private returns to innovation likely to be smaller than the social returns to innovation?

A) Innovations are not likely to be profitable unless a large number of firms get involved in the production of the new technology.
B) Innovators are often so tempted by greed that they keep their innovation a secret, so the rest of society does not know of the innovation and cannot take advantage of it.
C) The ideas that a person or firm comes up with may leak to the rest of society, so the advantages of the innovation are not limited to the profits the innovator enjoys.
D) The first firm to come up with an innovation usually cannot make a profit with the innovation until other firms learn about it and copy it.

Question 7

Economic activities primarily directed toward creating or developing new ideas and new technology are called

A) technological diffusion.
B) innovative activities.
C) the information revolution.
D) technological competition.

Question 8

Microprocessors have become faster and faster since their invention in 1971,with their performance approximately doubling every 18-24 months.This trend of improvement has become known as

A) Gates's law.
B) The Intel effect.
C) Information clustering.
D) Moore's law.

Question 9

China is the largest spender on research and development in the world (in total dollars or dollar equivalents).

Question 10

Which of the following best represents Moore's law?

A) New technologies, such as personal computers, will have little impact on the economy because while they increase some workers' productivity, they cause other workers to lose their jobs.
B) Only about 1 in 10 technology firms financed by venture capital will succeed, 3 in 10 will break even, and 6 in 10 will fail.
C) Microprocessor technology advances rapidly enough that microprocessors double their performance every 18-24 months.
D) Technology advances rapidly enough to extend human life expectancies by one year every six years.

Question 11

A region containing a group of innovative companies and the resources they need to succeed,such as Silicon Valley,is called an innovation cluster.

Question 12

A productivity-enhancing innovation has the effect of shifting the supply curve to the right.

Question 13

Which of the following is NOT typically true of an innovation cluster?

A) A major university is usually present.
B) The cluster has a pool of skilled labor that can move from one company to another.
C) Financial sources, like venture capital firms, tend to locate in the same area.
D) The chances of innovations occurring tend to decline as the innovation cluster gets larger and as the available talent is used up.

Question 14

Brand-new,technologically innovative companies often receive capital from companies that specialize in high-risk start-up firms and sometimes get involved in the strategic decisions of the firm.These investment companies are known as

A) venture capitalists.
B) mutual funds.
C) brokerage houses.
D) investment banks.

Question 15

Governments that discourage profit seeking will tend to encourage more innovation because the best innovators are motivated by inner creativity and not money.

Question 16

Currently the main sources for basic research are

A) large corporations.
B) government and universities.
C) charitable organizations.
D) small businesses.

Question 17

Locations like Silicon Valley,California; Cambridge,Massachusetts; and Bangalore,India have generated a large number of technological innovations,partly due to the concentration of people and capital that are specialized in innovative activities.These regions are known as

A) innovation clusters.
B) information nodes.
C) technology cells.
D) human capital districts.

Question 18

The supply curve for innovative activities

A) slopes downward because as the price of innovative activities rises, people will want to consume fewer innovative services.
B) slopes downward because as the price of innovation rises, people who would otherwise become scientists begin to go into other occupations like law or business.
C) slopes upward because as the price of innovation rises, more people and capital will be attracted into innovative activities.
D) slopes upward because as the price of innovation rises, people who would otherwise become scientists begin to go into other occupations like law or business.

Question 19

Scientific investigations that have no immediately obvious commercial applications are called sterile research.

Question 20

Which of the following would tend to increase the quantity of innovative activities?

A) An increase in the rate of immigration of scientists and engineers.
B) Dispersing innovative activity away from clusters, where ideas often stagnate.
C) A change in government policy that makes patents more difficult to obtain.
D) A decline in the rate of return on investment in research and development.

Question 21

Which of the following would NOT be an example of a technological change?

A) The government passes a law expanding the funding available to NASA and other agencies concerned with the advancement of basic science.
B) A pharmaceutical company develops a new drug that effectively fights malaria.
C) A team of nuclear scientists develop a new way of generating nuclear power that is safer than the older methods but is more expensive to implement.
D) Google develops a new way to perform Internet searches that makes searches produce more relevant results.

Question 22

A productivity-enhancing innovation has the effect of

A) shifting a supply curve to the right.
B) shifting a supply curve to the left.
C) shifting a demand curve to the right.
D) shifting a demand curve to the left.

Question 23

The government allows inventors to apply for a temporary government monopoly on their invention.The government will prevent others from making or selling the invention for a period of years to encourage innovation.What is this temporary monopoly called?

A) A trademark.
B) A patent.
C) An investment tax credit.
D) Moore's law.

Question 24

Which of the following would be an example of applied research?

A) Studies of the earth's climate 5,000 to 6,000 years ago.
B) Research into the use of new combustion techniques that could increase gas mileage in vehicle engines.
C) Research into the effects of zero-gravity environments on plant life.
D) Research into string theory in advanced subatomic physics.

Question 25

The immigration of skilled scientists and engineers from other nations will have which of the following effects?

A) The demand curve for innovative activities will be pushed to the left, decreasing the amount of innovation.
B) The supply curve for innovative activities will be pushed to the left, increasing the amount of innovation.
C) The demand curve for innovative activities will be pushed to the right, increasing the amount of innovation.
D) The supply curve for innovative activities will be pushed to the right, increasing the amount of innovation.

Question 26

Scientific investigations that have no immediately obvious commercial applications are called

A) basic research.
B) sterile research.
C) applied research.
D) diffused research.

Question 27

Which of the following is the function of a patent?

A) A patent encourages more rapid technological diffusion by requiring the inventor to license the invention to anyone at no charge for three years.
B) A patent allows the inventor to prevent others from making or selling an invention for a period of years to encourage innovation.
C) A patent produces revenue for the federal government by giving the government a percentage of the licensing fees from new inventions.
D) A patent prevents the inventor from licensing the invention to anyone for a period of 20 years to encourage the inventor to more thoroughly develop the idea.

Question 28

Which of the following is not an example of research and development?

A) Government funding to a biochemistry professor for the study of new pharmaceutical therapies.
B) Government funding to elementary and middle schools.
C) Government funding of new public transportation technologies.
D) General Motors funding a study of new internal combustion technology.

Question 29

Which of the following occurs if there is a quality-of-life innovation?

A) Positive externalities are reduced, or negative externalities are increased.
B) Positive externalities are increased, or negative externalities are reduced.
C) New goods or services are created, allowing people to do things that they could not do before.
D) More of the same products can be produced at lower cost.

Question 30

Which of the following would tend to encourage more innovation in the United States?

A) Stricter enforcement of the patent laws.
B) A limit on the number of scientists and engineers from other nations who are allowed to work in the United States.
C) Government restrictions on the amount of risk venture capital firms are allowed to take.
D) Protection of manufacturing industries through tariffs and other trade barriers.

Question 31

Scientists sent the Cassini spacecraft past Saturn,where it discovered rings around Saturn's moon Rhea.This is an example of

A) Technological diffusion.
B) Product development.
C) Applied research.
D) Basic research.

Question 32

Which of the following would tend to narrow the gap between the private return to innovation and the social return to innovation?

A) More spending on research and development.
B) More competition in the production of newly created goods and services.
C) A patent.
D) An increase in overall scientific productivity.

Question 33

Suppose home builders figure out how to produce houses faster by prefabricating more of the house in a factory,then transporting the components to the construction site.This saves labor time and prevents materials from being wasted.Which type of innovation is this?

A) The creation of new goods and services.
B) A quality-of-life innovation.
C) A productivity-enhancing innovation.
D) Basic research.

Question 34

Suppose scientists figure out how to prevent strokes and heart attacks by using microscopic robots that enter the bloodstream and fix problems before they become serious.This could fit into two categories of innovation.They are

A) a quality-of-life innovation and a productivity-enhancing innovation.
B) the creation of new goods and services and a productivity-enhancing innovation.
C) the creation of new goods and services and a quality-of-life innovation.
D) a productivity-enhancing innovation and basic research.

Question 35

Which of the following would be an example of basic research?

A) Studies of the atmosphere on Neptune.
B) Research into gene therapy to treat Alzheimer's disease.
C) Studies of circuit miniaturization for applications in computers.
D) A pharmaceutical company's research into a chemical compound that could reduce the growth rate of cancer cells.

Question 36

The process by which new ideas spread from the original company to other businesses in the economy is called

A) technological diffusion.
B) innovative revolution.
C) Moore's process.
D) patent dispersion.

Question 37

Which of the following would raise the wages of scientists and engineers?

A) A decline in the rate of return on research and development.
B) A decline in the level of legal protection of property rights over new inventions.
C) An increase in the demand for innovative activities.
D) The immigration of skilled scientists and engineers from other nations.

Question 38

Suppose a new way of producing fireworks is developed,using different chemicals that do not release as many hazardous heavy metals into the environment.Which type of innovation is this?

A) A quality-of-life innovation.
B) The creation of a new good or service.
C) A productivity-enhancing innovation.
D) Basic research.

Question 39

The largest spender on research and development in the world (in total dollars or dollar equivalents)is

A) China.
B) the United States.
C) Japan.
D) the United Kingdom.

Question 40

Allowing people to profit from their innovations has which of the following effects?

A) Technological improvement will be slowed because people focus only on commercially viable projects instead of projects that are truly useful to society.
B) The rate of technological advancement will expand because people are encouraged to innovate by the hope of financial gain.
C) Resources will be diverted from other parts of the economy so that the economy as a whole suffers.
D) Society will benefit, but only to the extent that the profits from those innovations are taxed for the common good.

Question 41

Research into string theory in advanced subatomic physics would be an example of

A) basic research.
B) applied research.
C) development.
D) technological regress.

Question 42

A quality-of-life innovation generates __________ externalities or reduces __________ externalities.

A) positive; negative
B) revenue; cost
C) marginal; average
D) network; out-of-network

Question 43

It took several decades for advances in computer technology to have a significant impact on the economy.This illustrates the fact that

A) Many technologies need to mature before they reach the point where they can have an impact.
B) Technologies cannot have an impact until government regulation catches up.
C) People are initially irrationally suspicious of new technology and refuse to accept it until some time has passed.
D) New technology is not really needed; it tends to be a way for retailers to boost sales by selling people things they do not really need.

Question 44

Computers became powerful enough to make a real difference in the economy in the

A) 1970s.
B) 1980s.
C) 1990s.
D) 2000s.

Question 45

In which of the following countries was R&D spending the highest in 2008?

A) The United States.
B) China.
C) Japan.
D) Germany.

Question 46

Which of the following would tend to encourage a faster rate of long-run economic growth?

A) An increase in the supply of innovative activities.
B) A decrease in the demand for innovative activities.
C) A decline in basic research.
D) A reduction in the number of engineers and scientists immigrating to the United States from other countries.

Question 47

Over the past 20 years,the average return on venture capital investments has been around __________ per year,compared to about 10 percent for the stock market.

A) 10 percent
B) 16 percent
C) 6 percent
D) 25 percent

Question 48

Which of the following technological breakthroughs failed to deliver many economic benefits?

A) Antibiotics.
B) Automobiles.
C) Manned space travel.
D) Computers.

Question 49

There are three different channels by which technological change can affect the economy.List these and provide a brief definition of each.

Question 50

Which of the following best fits the definition of basic research?

A) Research into a process that converts radioactive fly ash from coal-burning power plants into bricks.
B) Research into mosquito physiology to find vulnerabilities to be exploited by future pesticides.
C) A study of parallel universes.
D) Research into ultra capacitors that store electrical energy for use in hybrid vehicles.

Question 51

What does "R&D" stand for?

A) Research and design.
B) Research and development.
C) Revenue and demand.
D) Real and domestic.

Question 52

Which of the following would NOT encourage economic growth in the United States?

A) The development of artificial intelligence, allowing computers to fill jobs formerly occupied by human beings.
B) A limit on the number of foreign citizens who are permitted to study in high-level research institutions in the United States.
C) The development of a better Internet search engine.
D) An improvement in shipbuilding technology that allows large cargo ships to be built at lower cost, reducing the cost of trading with other countries.

Question 53

Television would have been considered a "new good" type of innovation because

A) consumers already regularly listened to the radio for entertainment.
B) it had no equivalent in the past.
C) it gave companies a new source of advertising revenues.
D) it enhanced the quality of life for most people in the economy.

Question 54

One important innovation cluster mentioned in the textbook is __________,which is the world center for biotech.

A) Silicon Valley, CA
B) Bangalore, India
C) Palo Alto, CA
D) Cambridge, MA

Question 55

If a market is close to perfect competition,profits may be

A) so low that companies do not have enough extra money to spend on long-run research.
B) so high that companies have no incentive to spend money on long-run research.
C) so low that companies have no incentive to spend money on long-run research.
D) so high that companies are not willing to risk any extra money on long-run research.

Question 56

AT&T,the employer of the three scientists credited with inventing the transistor,

A) reaped very few economic benefits from the invention.
B) suffered economic losses because of the invention.
C) earned a modest 10 percent return from the invention.
D) earned an unprecedented 2,000 percent return from the invention.

Question 57

What is the difference between basic research and applied research? Provide one example of each.

Question 58

Technological advances that reduce pollution fall into which category of innovation?

A) Productivity-enhancing innovation.
B) Creation of new goods and services.
C) Quality-of-life innovation.
D) Pollution reduction does not fit into any of the categories of innovation.

Question 59

There are often wide differences between the productivity levels of different factories making the same products because

A) patent protections limit the benefits of innovation to the firm responsible for the innovation.
B) some companies are more willing to take the risk of adopting a new technology than are others.
C) the intensity of competition varies from industry to industry.
D) some factories are located in innovation clusters and others are not.

Question 60

Show,using a demand and supply diagram,what will happen to the wages of scientists and engineers if there is an increase in immigration of scientists and engineers from other countries.

Question 61

Economic studies show that the rate of return on research and development investment is very high,possibly yielding 25-50% a year.Why,then,are banks reluctant to lend to start-up firms investing in a new idea,and where do these firms get their capital?

Question 62

What is a patent,and how does it encourage innovation?