Chapter 11W – Technology, R&D, and Efficiency
11W–32
87. Which pair of market structures provides firms with the greatest ability to finance R&D
out of retained earnings?
88. Economists who contend that oligopolists have a strong incentive to engage in R&D say
that:
Chapter 11W – Technology, R&D, and Efficiency
89. Those who contend that oligopolists are less likely than more competitive firms to engage
in R&D say that:
90. In the inverted-U theory of R&D:
91. The conjecture that R&D expenditures as a percentage of firms’ sales first rise, reach a
peak, and then fall as industry concentration rises is known as the:
Chapter 11W – Technology, R&D, and Efficiency
92. In the inverted-U theory of R&D, which of the following industry concentration ratios
would be most conducive to R&D (as a percentage of firm sales)?
93. Industry A has a 60 percent concentration ratio, while industry B has a 40 percent
concentration ratio. According to the inverted-U theory, all else equal, we can conclude that:
Chapter 11W – Technology, R&D, and Efficiency
94. Which among the following is the strongest determinant of an industry’s technological
progressiveness?
95. In general, the:
96. Technological advance improves productive efficiency by:
Chapter 11W – Technology, R&D, and Efficiency
97. Technological advance improves allocative efficiency by:
98. The process by which new firms and new products replace existing dominant firms and
products is called:
99. Creative destruction is:
Chapter 11W – Technology, R&D, and Efficiency
100. Creative destruction is not automatic because:
101. (Consider This) The central idea illustrated by the vignette on “catgut” used as violin
strings is:
102. (Consider This) Violin strings made from sheep intestines were first called “catgut”
because:
Chapter 11W – Technology, R&D, and Efficiency
103. (Last Word) In 1981, IBM introduced its version of the personal computer to compete
with existing personal computers offered by Apple and others. IBM’s action best exemplifies:
104. (Last Word) Construction of the first working computer “mouse” best exemplifies:
105. (Last Word) In 1995 Microsoft released its Windows 95 operating system which was a
far better system than the Microsoft system it replaced. Microsoft’s Window 95 best
illustrates:
Chapter 11W – Technology, R&D, and Efficiency
106. Innovation is the first discovery of a new product or production process; invention is the
first successful commercial introduction of the product or process.
107. Diffusion is the first successful commercial introduction of a product, the use of a new
method, or the creation of new form of business enterprise.
108. Venture capital is another name for retained earnings.
109. The marginal cost to a firm of R&D expenditures is the market interest rate the firm must
pay to obtain the needed financing.
Chapter 11W – Technology, R&D, and Efficiency
110. A firm’s optimal amount of R&D occurs where the marginal benefit of this activity
exceeds marginal cost by the greatest amount.
111. A firm’s optimal amount of R&D occurs where the interest-rate cost of funds and the
expected rate of return are equal.
112. Successful new products enable consumers to increase the total utility they obtain from a
specific amount of their total spending.
113. Process innovation is represented as a downward shift in a firm’s total product curve and
its average total cost curve.
Chapter 11W – Technology, R&D, and Efficiency
114. The theory that R&D expenditures as a percentage of firms’ sales first rise, reach a peak,
and then fall with increases in industry concentration is called the inverted-U theory of R&D.
115. The process by which new firms and new products destroy existing dominant firms and
their products is called creative destruction.
116. The interest-rate cost-of-funds curve is perfectly elastic because firms can borrow as
much or as little as they want at market interest rates.
117. The interest-rate cost-of-funds curve is perfectly elastic because expected rates of return
on R&D are constant.
Chapter 11W – Technology, R&D, and Efficiency
118. Large, well-established firms are more likely to use retained earnings to finance R&D,
while small start-up firms are more likely to rely on venture capital.
119. Kara’s Kettles, Inc. has developed a new and improved type of cookware. Alex, a typical
consumer, will necessarily purchase Kara’s new product if his MU/P for the new cookware
exceeds that of competing products.
120. According to the inverted-U theory of R&D, other things equal, firms in industries with
concentration ratios around 10 percent will be more technologically progressive than firms in
industries with 50 percent concentration ratios.