Question 1

The table shows the expected rate of return, R&D spending, and interest-rate cost-of-funds for a hypothetical firm. In a graph for determining the optimal R&D expenditure, the interest-cost of funds curve would be a(n)

Accepted Answer

A)  upsloping line within the range $35M to $75M.
B)  horizontal line at 7 percent.
C)  upsloping line within the range 5 to 13 percent.
D)  downsloping line within the range 13 to 5 percent.E) A) and B)
F) A) and C)

Question 2

Suppose that Book-Cost Busters (BCB) , without authorization, reproduced a best-selling novel and placed it for downloading on the BCB pay-for-use website. This action would violate the publisher's

Accepted Answer

A)  profit rights.
B)  patent.
C)  copyright.
D)  trademark.E) C) and D)
F) All of the above

Question 3

Venture capital is another name for retained earnings.

Accepted Answer

A) True 
 B)False

Question 4

Other things equal, patents

Accepted Answer

A)  decrease the expected rate of return on an R&D expenditure.
B)  increase the expected rate of return on an R&D expenditure.
C)  increase the interest-rate cost of funds used to finance an R&D expenditure.
D)  decrease the interest-rate cost of funds used to finance an R&D expenditure.E) All of the above
F) A) and B)

Question 5

Refer to the data. The firm's optimal amount of R&D spending is

Accepted Answer

A)  $20 million.
B)  $40 million.
C)  $60 million.
D)  $80 million.E) A) and D)
F) B) and D)

Question 6

In the inverted-U theory of R&D,

Accepted Answer

A)  process innovation and product innovation are inversely related.
B)  technological change is inversely related to scientific discovery.
C)  R&D expenditures rise continuously as a percentage of firms' sales as industry concentration rises.
D)  R&D expenditures first rise as a percentage of firms' sales as industry concentration increases, but then fall as higher industry concentration occurs.E) A) and D)
F) B) and C)

Question 7

Describe R&D expenditures in the United States. What percentage of spending goes for invention, innovation, and diffusion?

Accepted Answer

Research and development expenditures in...

Question 8

Suppose that Marlen Fisher has legal protection against anyone producing and selling a fishing lure identical to his unique-action "MarFish" lure, whatever the competitor might name the lure. This legal protection is most likely to be a

Accepted Answer

A)  trademark.
B)  restraining order.
C)  patent.
D)  copyright.E) A) and B)
F) B) and D)

Question 9

The optimal market structure for technological advance seems to be an industry in which

Accepted Answer

A)  most firms are purely competitive.
B)  there is a natural monopoly with a large market for the product.
C)  there are oligopolistic firms and several small and highly innovative firms.
D)  the government provides some funding for research and development.E) B) and C)
F) None of the above

Question 10

In the graph, the interest-rate cost-of-funds curve would be the line connecting points

Accepted Answer

A)  a, c, and e.
B)  b, c, and e.
C)  b, c, and d.
D)  a, c, and d.E) B) and D)
F) A) and C)

Question 11

Henry Ford's development of an assembly method for building cars and trucks would be an example of

Accepted Answer

A)  product improvement.
B)  fast-second strategy.
C)  process innovation.
D)  inverted-U theory.E) A) and C)
F) A) and B)

Question 12

Other things equal, trademarks and brand names

Accepted Answer

A)  increase the interest-rate cost of funds used to finance R&D expenditures.
B)  decrease the interest-rate cost of funds used to finance R&D expenditures.
C)  decrease the expected rate of return on R&D expenditures.
D)  increase the expected rate of return on R&D expenditures.E) None of the above
F) A) and B)

Question 13

Venture capital refers to

Accepted Answer

A)  equipment and factories.
B)  financing for start-ups.
C)  entrepreneurs who start businesses.
D)  creative destruction in capitalism.E) A) and B)
F) B) and D)

Question 14

Suppose a firm anticipates that an R&D expenditure of $100 million will result in a new production process that will reduce costs and thus create a one-time added profit of $112 million a year later. The firm's expected rate of return is

Accepted Answer

A)  0.12 percent.
B)  12 percent.
C)  112 percent.
D)  2 percent.E) C) and D)
F) A) and C)

Question 15

Refer to the data. At $20 million of R&D expenditures, the

Accepted Answer

A)  marginal cost of R&D exceeds the marginal benefit.
B)  expected total return from R&D is at a maximum.
C)  interest-rate cost of funds is negative.
D)  marginal benefit of R&D exceeds the marginal cost.E) A) and D)
F) None of the above

Question 16

U.S. firms collectively devote the largest portion of their total R&D spending to

Accepted Answer

A)  applied research (pursuing invention) .
B)  basic scientific research.
C)  innovation and diffusion.
D)  financing start-up firms.E) B) and D)
F) C) and D)

Question 17

The corporate decision on type and level of R&D activity is difficult because

Accepted Answer

A)  the interest-rate cost of funds is difficult to estimate.
B)  much of corporate R&D is based on the pursuit of science, not on the profit motive.
C)  expected returns lie in the future and are highly uncertain.
D)  total returns and marginal returns greatly diverge.E) B) and D)
F) None of the above

Question 18

The central idea illustrated by the vignette on "catgut" used as violin strings is

Accepted Answer

A)  patent rights.
B)  research and development activity.
C)  derived demand.
D)  trade secrets.E) B) and C)
F) C) and D)

Question 19

In deciding on an optimal amount and type of research and development, firms should adhere to the rule: Expand R&D until

Accepted Answer

A)  expected rate of return is zero.
B)  expected rate of return equals the interest rate.
C)  expected rate of return exceeds the interest rate by the greatest amount.
D)  the interest rate is constant.E) B) and D)
F) A) and D)

Question 20

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Accepted Answer

A) True 
 B)False

Exam 15: Technology, RD, and Efficiency

Henry Ford's development of an assembly method for building cars and trucks would be an example of

Correct AnswerverifiedShow Answer

Consumers will buy a new product instead of an old one that they are used to buying, if the MU of the new product is larger than the MU of the old product.

Correct AnswerverifiedShow Answer

Suppose that Book-Cost Busters (BCB) , without authorization, reproduced a best-selling novel and placed it for downloading on the BCB pay-for-use website. This action would violate the publisher's

Correct AnswerverifiedShow Answer

U.S. firms collectively devote the largest portion of their total R&D spending to

Correct AnswerverifiedShow Answer

Refer to the data. The firm's optimal amount of R&D spending is

Correct AnswerverifiedShow Answer

Suppose that Marlen Fisher has legal protection against anyone producing and selling a fishing lure identical to his unique-action "MarFish" lure, whatever the competitor might name the lure. This legal protection is most likely to be a

Correct AnswerverifiedShow Answer

Refer to the data. At $20 million of R&D expenditures, the

Correct AnswerverifiedShow Answer

The optimal market structure for technological advance seems to be an industry in which

Correct AnswerverifiedShow Answer

Other things equal, patents

Correct AnswerverifiedShow Answer

Describe R&D expenditures in the United States. What percentage of spending goes for invention, innovation, and diffusion?

Correct AnswerverifiedResearch and development expenditures in...View AnswerShow Answer

The table shows the expected rate of return, R&D spending, and interest-rate cost-of-funds for a hypothetical firm. In a graph for determining the optimal R&D expenditure, the interest-cost of funds curve would be a(n)

Correct AnswerverifiedShow Answer

Suppose a firm anticipates that an R&D expenditure of $100 million will result in a new production process that will reduce costs and thus create a one-time added profit of $112 million a year later. The firm's expected rate of return is

Correct AnswerverifiedShow Answer

In the inverted-U theory of R&D,

Correct AnswerverifiedShow Answer

Venture capital is another name for retained earnings.

Correct AnswerverifiedShow Answer

Venture capital refers to

Correct AnswerverifiedShow Answer

In the graph, the interest-rate cost-of-funds curve would be the line connecting points

Correct AnswerverifiedShow Answer

The corporate decision on type and level of R&D activity is difficult because

Correct AnswerverifiedShow Answer

In deciding on an optimal amount and type of research and development, firms should adhere to the rule: Expand R&D until

Correct AnswerverifiedShow Answer

Other things equal, trademarks and brand names

Correct AnswerverifiedShow Answer

The central idea illustrated by the vignette on "catgut" used as violin strings is

Correct AnswerverifiedShow Answer

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Research and development expenditures in...
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