Chapter 11W – Technology, R&D, and Efficiency
85. The inverted-U theory shows the relationship between:
86. An industry with which of the following four-firm concentration ratios would tend to have
the greatest amount of R&D expenditures as a percentage of sales?
87. According to the inverted-U theory, R&D expenditures as a percentage of sales tend to be
relatively low in:
Chapter 11W – Technology, R&D, and Efficiency
88. The optimal market structure for technological advance seems to be an industry in which:
89. Besides market structure, another factor that seems to influence the level of R&D
spending in an industry is the:
90. Process innovation leads to technological advance because it:
Chapter 11W – Technology, R&D, and Efficiency
91. Product innovation contributes to technological advance primarily by:
92. One of the outcomes for society from product innovation is:
93. In the 1800s, railroads broke up the monopoly position of wagons, ships, and barges as the
major means of transporting goods. This would be an example of:
Chapter 11W – Technology, R&D, and Efficiency
94. In the music industry, cassette tapes were replaced by compact discs, which in turn are
replaced by the iPod and MP3 technology. This process would be an example of:
95. Joseph Schumpeter viewed capitalism as a process of “creative destruction” because:
96. To maintain returns from research and development, firms:
Chapter 11W – Technology, R&D, and Efficiency
97. All of the following statements are true about technological advance, except:
98. The history of the development of the Internet clearly illustrates what idea?
99. Technological advance consists of short-run adjustments to the production process that
lower costs.
Chapter 11W – Technology, R&D, and Efficiency
100. Inventions and innovations can both be patented.
101. Innovation pertains to commercialization, while invention pertains more to scientific
research.
102. Firms channel a majority of their R&D expenditures to scientific research.
103. The modern view of technological advance is that it is an external force to which the
economy adjusts.
Chapter 11W – Technology, R&D, and Efficiency
104. Many economists view technological advance as mainly a response to profit
opportunities arising within a capitalist economy.
105. All inventors are entrepreneurs.
106. R&D by government and universities has not been an important factor in fostering
technological advance.
107. When entrepreneurs use personal savings to finance the R&D for a new venture, the
marginal cost of financing is the forgone interest.
Chapter 11W – Technology, R&D, and Efficiency
108. When corporations use retained earnings to finance the R&D for a new venture the
marginal cost of financing is zero.
109. The optimal amount of R&D spending for the firm occurs where its expected return is
equal to the interest-rate cost-of-funds to finance it.
110. If an R&D activity is affordable, the firm should spend on that activity.
111. The outcomes from R&D expenditures are expected to be worthwhile, but the results are
not guaranteed.
Chapter 11W – Technology, R&D, and Efficiency
112. 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 bigger than the MU of the old product.
113. Most product innovations consist of minor changes to existing products and are
incremental improvements.
114. Process innovation lowers the firm’s total product and raises the firm’s average total
cost.
115. One of the advantages of being first to develop a new product is the opportunity to
develop brand-name recognition.
Chapter 11W – Technology, R&D, and Efficiency
116. A “fast-second strategy” refers to a situation where small competitors of a dominant firm
will wait for the dominant firm to innovate, and then quickly imitate the dominant firm’s
innovations.
117. Pure monopoly is the best market structure for encouraging R&D and innovation.
118. The inverted-U theory suggests that R&D effort is strongest in very high concentration
industries.
119. The technical and scientific characteristics of an industry may be less important than its
structure in determining R&D spending and innovation.
Chapter 11W – Technology, R&D, and Efficiency
120. Technological advance may lead to new monopolies, and may also destroy existing
monopolies.
121. Creative destruction is the situation where the creation of new products destroys the
monopoly market positions of firms producing existing products.