15–61
Test Bank: II
Topic: Invention, Innovation, and Diffusion
142.
In 2014, which of the following nations ranked highest in total R&D expenditures as a
percentage of GDP?
A.
the United States
143.
About what percentage of research and development spending by businesses in the United
States in 2012 went to development (innovation and imitation) and about
what percentage went
to basic and applied research and invention, respectively?
A. 20, 80
144.
What activity traditionally receives the largest share of total business spending on R&D in
the U.S.?
A. invention
15–62
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written consent of McGraw-Hill Education.
D.
applied research
145.
The modern view of technological advance is that it
A.
is the result of random lucky events unrelated to the economic system.
146.
The traditional view of technological advance was that it
C.
was the result of capitalism and the rivalry among firms.
D.
arose from international trade and the sharing of ideas among nations.
147.
Entrepreneurs are those people who are
D.
working for research institutes.
148.
Entrepreneurs differ from other innovators because they
A. are more inventive.
149.
“Intrapreneurs” is the term sometimes used to refer to
A.
entrepreneurs who are initiators and risk bearers.
15–64
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written consent of McGraw-Hill Education.
Test Bank: II
Topic: Role of Entrepreneurs and Other Innovators
150.
Which of the following firms was not a “start-up”?
A.
Google
151.
Which of the following is a “spin-off” firm?
D.
Pepsi
152.
Entrepreneurs and innovative firms with past successes in developing products
A. have less access to resources for further innovation.
15–65
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written consent of McGraw-Hill Education.
Blooms: Understand
Dif ficulty: 02 Medium
Learning Objective: 15-02 Explain how entrepreneurs and other innovators further
technological advance.
Test Bank: II
Topic: Role of Entrepreneurs and Other Innovators
153.
Which would be an example of innovation within an existing business firm?
C.
the formation of the start-up firm Amgen
D.
the merger of AOL and Time-Warner
154.
Which of the following would be the best example of a “start-up“?
A. the formation of Imation by the 3Com Corporation
155.
Which of the following are aptly considered entrepreneurs?
A.
top executives of a company
15–66
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written consent of McGraw-Hill Education.
D. those who form start-ups
156.
The role of entrepreneurs includes all of the following, except
A. forming start-up businesses.
157.
Why is the percentage of business research and development spending for basic research so
small?
A.
Basic research is the sole responsibility of university research labs.
158.
What is an example of a technological breakthrough that came out of a government or
university laboratory?
D.
Post-it note pads
159.
The following are examples of technological breakthroughs that came out of a government
or university laboratory, except
A.
the Internet.
160.
Venture capital refers to
A. equipment and factories.
15–68
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written consent of McGraw-Hill Education.
Diffi cu lty: 02 Medium
Learning Objective: 15–03 Summarize how a firm determines its optimal amount of
research and development (R
Test Bank: II
161.
Firms have several sources of funds to finance their R&D activities, including the following,
except
A.
loans obtained from banks and bondholders.
162.
R&D spending decisions are complicated because
D.
it is difficult to determine which R&D activities could be patented.
163.
The marginal cost-of-funds curve for a firm shows the
D.
sources of funds that a firm has for its various projects.
15–69
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written consent of McGraw-Hill Education.
Ac cessi bi l it y: Keyboard Navigation
Blooms: Understand
Dif ficulty: 02 Medium
Learning Objective: 15–03 Summarize how a firm determines its optimal amount of
research and development (R
Test Bank: II
164.
The optimal amount of R&D for a firm depends on the following, except
A.
marginal cost of funds for R&D projects.
165.
Expected Rate of Return (%)
R&D ($M)
Interest-Rate Cost of Funds (%)
13%
35
7%
11
45
7
9
55
7
7
65
7
5
75
7
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)
A. upsloping line within the range $35M to $75M.
15–70
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Diffi cu lty: 02 Medium
Learning Objective: 15–03 Summarize how a firm determines its optimal amount of
research and development (R
Test Bank: II
166.
Expected Rate of Return (%)
R&D ($M)
Interest-Rate Cost of Funds (%)
13%
35
7%
11
45
7
9
55
7
7
65
7
5
75
7
The table shows the expected rate of return, R&D spending, and interest-rate cost-of–funds for a
hypothetical firm. The optimal amount of R&D expenditure of the
firm would be
A.
$45 million.
167.
Expected Rate of Return (%)
R&D ($M)
Interest-Rate Cost of Funds (%)
13%
35
7%
11
45
7
9
55
7
7
65
7
5
75
7
The table shows the expected rate of return, R&D spending, and interest-rate cost-of-funds for a
hypothetical firm. If interest-rate cost-of–funds rose to 11 percent,
the optimal amount of R&D
spending would be
A. $35 million.
168.
A firm‘s marginal benefit from its R&D expenditures is the
A. total amount spent on its R&D activities.
169.
A firm decides to make a $20 million expenditure on research and development that will
create a new product. This product is expected to increase the firm’s
revenues by a total of $24
million in the next year. The firm also estimates that the production cost of the new product will
be $22 million. What is the expected rate of return on this research and development expenditure?
A.
8.3 percent
15–72
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Blooms: Understand
Diffi cu lty: 02 Medium
Learning Objective: 15–03 Summarize how a firm determines its optimal amount of
research and development (R
Test Bank: II
170.
A firm decides to make a $20 million expenditure on research and development that will
create a new product. This product is expected to increase the firm’s
revenues by a total of $24
million in the next year. The firm also estimates that the production cost of the new product will
be $22 million. If the firm has to take out a loan to finance the project, what is the highest interest
rate it will pay and still do the project among the choices given?
A.
8.3 percent
171.
The expected-rate-of-return curve for R&D expenditures of a firm slopes downward
because of
D.
the law of supply for R&D expenditures.
172.
In the graph, the interest-rate cost–of-funds curve would be the line connecting points
A.
a, c, and e.
173.
In the graph, the expected-rate-of–return curve would be the line connecting points
D.
a, c, and d.
174.
In the graph, the optimal amount of R&D spending and the interest-rate cost-of-funds at that
optimal level would be, respectively,
A.
$10 million and 9 percent.
175.
In the graph, the difference between points a and b indicates that at $10M of R&D spending, the
A. marginal cost is greater than the marginal benefit.
15–77
176.
In the graph, the difference between points d and e indicates that at $50M of R&D spending, the
D.
marginal cost is less than the marginal benefit. Thus, R&D spending should be increased.
177.
Expected Rate of Return (%)
R&D ($B)
14%
12
12
18
10
24
8
30
6
36
4
42
2
48
The table shows the rate of return and R&D spending for a hypothetical firm. Assume the
interest-rate cost of funds is 8 percent. What is the optimal amount of R&D
expenditures?
A. $24 billion
178.
Expected Rate of Return (%)
R&D ($B)
14%
12
12
18
10
24
8
30
6
36
4
42
2
48
The table shows the rate of return and R&D spending for a hypothetical firm. Assume the
interest-rate cost of funds is 8 percent. What will be the marginal cost and
the marginal benefit
of the optimal amount of R&D spending?
A. MC = 8 percent; MB = 6 percent
15–79
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written consent of McGraw-Hill Education.
Blooms: Understand
Dif ficulty: 02 Medium
Learning Objective: 15–03 Summarize how a firm determines its optimal amount of
research and development (R
Test Bank: II
179.
Expected Rate of Return (%)
R&D ($B)
14%
12
12
18
10
24
8
30
6
36
4
42
2
48
The table shows the rate of return and R&D spending for a hypothetical firm. Assume the
interest-rate cost of funds falls from 10 percent to 6 percent. What will
happen to the optimal
amount of R&D spending?
D.
It decreases from $42 billion to $24 billion.
180.
An amount of R&D spending that is less than the optimal amount indicates that the
A.
interest-rate cost-of-funds and expected rate of return are constant.
15–80
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written consent of McGraw-Hill Education.
Blooms: Understand
Diffi cu lty: 02 Medium
Learning Objective: 15–03 Summarize how a firm determines its optimal amount of
research and development (R
Test Bank: II
181.
An amount of R&D spending that is greater than the optimal amount indicates that the
A.
marginal benefit of R&D expenditures is equal to the marginal cost.
182.
A firm should increase the amount of R&D expenditures to
A. the maximum amount of funding that is available to the firm.
183.
The outcomes from R&D expenditures by firms are
A.
always profitable for the firms, if they have the funds available.