QUIZ--CHAPTER SIXTEEN: Choose the best answer; explain (very brief) answer if time allows
6. In many high-tech industries in the economy, such as computers, medical equipment, and automobiles
a. guarantees price competition is utilized by firms more than innovation to compete with rivals.
b. firms compete on the basis of innovation only; never engaging in price competition.
c. innovation is utilized by firms to compete with rivals more than price competition.
d. firms use price competition only; never engaging in innovation to compete with rivals.
e. firms utilize innovation and price competition equally to compete with rivals.
7. Why do firms spend money on costly innovation?
a. Competitive markets leave firms no choice but to innovate.
b. Innovation is a low-risk activity.
c. Innovation always results in higher profits for firms.
d. Innovation is usually profitable because the majority of innovations reach the market place.
e. Because innovation is beneficial for society and firms are motivated to act in ways that are beneficial for society.
8. Profit-maximizing firms will choose a level of spending on research and development, in the short run, where the
a. marginal revenue from R&D is maximized.
b. total revenue from R&D is maximized.
c. marginal revenue from R&D is greater than its marginal cost.
d. marginal cost of R&D is minimized.
e. marginal revenue from R&D is equal to its marginal cost.
9. A successful process innovation can be expected to lead to
a. an upward shift of the MC and AC curves which will lower output and raise the price of the product.
b. an upward shift of the MC and AC curves which will raise output and lower the price of the product.
c. a downward shift of the MC and AC curves which will lower output and raise the price of the product.
d. a downward shift of the MC and AC curves which will raise output and lower the price of the product.
e. a downward shift of the MC and AC curves which will leave unchanged the output and price of the product.
10. Private firms
a. are more likely to fund basic research than applied research.
b. are more likely to fund applied research than basic research.
c. are equally likely to fund basic research and applied research.
d. are unlikely to fund either basic research or applied research.
e. will never fund basic research, but will fund applied research.
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