Micro Econ Exam 4 Part 2

Because of the legal protection for intellectual property, such as patents, a firm has a better chance of recouping the costs of research if it pursues A. basic technological research B. technologically innovative research C. applied technological research D. technologically positive research

C

59. A drug company is deciding how much to invest in Research and Development into finding a cure for the common cold. The table below shows the company's demand for financial capital for R&D of this cold drug, based on its expected rates of return from selling the cure. Every investment has an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole. If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest ___ in R&D if it receives both the private and the social benefits of this investment. A. $308 B. $264 C. $250 D. $228

A

For a negative externality, the __________________________ than the costs imposed on society as a whole. A. private costs of an action are less B. social costs of an action are less C. private benefits of an action are more D. social benefits of an action are more

A

Ideally, a patent should cover a long enough period of time for the inventor to _______________, but that period should not be so long that it allows the inventor to _____________________________. A. earn a hearty return; charge a high monopoly price permanently B. contribute to the social interest; only receive a slice of the social benefits C. earn a rate of return; prevent broad public access to classic works D. contribute to the social interest; prevent broad public access to inventions

A

If a small electric automobile manufacturer is able to gain the social return generated by its electric motor, its demand for financial capital would A. shift to the left. B. shift to the right. C. decrease substantially. D. increase slightly.

A

If an alternative policy could encourage both _____________________, instead of ________________________, consumers would benefit. A. invention and competition; invention and monopoly B. invention and monopoly; invention and public funding C. invention and monopoly; invention and competition D. invention and competition; invention and public funding

A

If the government determines that the private sector does not have sufficient incentive to carry out research and development, which of the following is likely to be a reasonable response? A. government can use public funds to pay for the R&D activities directly. B. setting up government-run laboratories to ensure public benefits arise from public funding. C. direct all public R&D funding to colleges and universities to ensure public benefits arise from public funding. D. ensure that firms are not entering cooperative ventures to lessen competition, as well as b and c above.

A

There is a skating rink in your city that is open to anybody to use at any time. They even provide skates for people who don't own any. This is an example of a good that is A. rivalrous and nonexcludable B. nonrivalrous and excludable C. rivalrous and excludable D. nonrivalrous and nonexcludable

A

Which of the following represents one of the methods that the government uses to promote technology? A. protection of intellectual property B. provision of a greater number of public goods C. maintenance of stable regulated financial markets D. creation of public colleges and universities

A

Cathy can take either of two separate roads to drive to work. The first is a lightly used new toll road that is rarely congested. The second road is a local road with no tolls, but it is often congested and has many potholes. In this instance, the toll road is A. nonrivalrous and excludable B. rivalrous and nonexcludable C. nonrivalrous and nonexcludable D. rivalrous and excludable

B

One difficulty with direct government support of R&D is that it inevitably involves government decisions about ___________________. A. whether it can agree on the amount of social benefit conferred to private firms B. which of the vast number of proposed projects are worthwhile C. the location of the congressional district receiving the research funding. D. quantifying the social benefit conferred on a private firm by an R&D tax reduction.

B

One reason some economists doubt that patent protection encourages innovation is that economic studies show that inventors receive only __________________ of the total economic value of their inventions in countries that ______________ . A. one-half to two-thirds; previously had few patents B. one-third to one-half; already had patents C. one-third to one-half; previously had no patents D. one-half to two-thirds; had existing patents

B

Raven Farms raises a substantial number of bees and uses the honey to produce its own skin healing cream. Raven Farms is situated next to the Oakcreek Apple Orchard. The bees from Raven Farms pollinate Oakcreek's apple trees. In this instance, Raven Farms A. derives more private benefits and provides less social benefit. B. provides more social benefits than it derives in private benefits. C. provides a marginal social benefit and derives a complete private benefit. D. provides a complete social benefit and derives a marginal private benefit.

B

When technology is advancing so quickly, even a patent from, say, two years ago may be ___________________, because __________________________ . A. somewhat outdated; few firms are relying on the technology B. completely outdated; no firm is relying on that technology any longer C. irrelevant; inventors are only receiving a slice of the social value. D. irrelevant; not every idea can remain under patent protection forever.

B

Which of the following is the most appropriate response of public policy to a negative externality like pollution? A. modernize, update, and restore homes in run down neighborhoods to decrease littering B. find ways to account for the social costs of the negative externality in economic decisions C. encourage high standards of public education to increase innovation capability of youth D. assist the private party creating the negative externality to receive more social benefits

B

Which of the following legislation was enacted in 1998 to allow copyright to be extended from 50 to 70 years after an author's death? A. Thomas Edison Patent Restoration Act B. Sonny Bono Copyright Term Extension Act C. Sonny Bono Patent Restoration Act D. Thomas Edison Copyright Term Extension Act

B

58. A drug company is deciding how much to invest in Research and Development into finding a cure for diabetes. The table below shows the company's demand for financial capital for R&D based on its expected rates of return from selling the cure. Every investment provides an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole. If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest ___ in R&D if it receives only the private benefits of this investment. A. $308 B. $264 C. $250 D. $228

C

A complementary approach to supporting R&D that does not involve the government's close scrutiny of particular R&D projects is to give firms A. a permanent monopoly over all their inventions that never expires. B. the option to fund all R&D projects through colleges or universities. C. a reduction in corporate taxes based on amount of R&D performed. D. assurance that antitrust authorities challenge cooperative R&D efforts.

C

For a positive externality, _________________________than the social benefits. A. private benefits of an action are more B. social benefits of an action are more C. private benefits of an action are less D. social costs of an action are less

C

If a firm's efforts to be technologically innovative will create a positive externality, then that firm will likely A. have more incentive to innovate to the extent that the whole of society desires. B. invest significantly more in its research and development activities. C. have less incentive to innovate to the extent that the whole of society desires. D. demand more financial capital investment to expand its R&D activities.

C

If the government altered its invention patent policy from a monopolistic policy to a competitive policy, then consumers A. would face higher prices and less quantity in the long-run. B. would face lower prices and less quantity in the short-run C. would benefit from the lower price and greater quantity sold. D. would benefit from lower prices due to increased public investments

C

Once it's patent application has been accepted, a firm is able to earn ________ on its product, which ___________________________________ . A. an increased rate of return for investors; raises doubts further R&D activities B. more profit; will allow it to recover the biggest slice of the social value created C. monopoly profits; offers an incentive for research and development to take place D. competitive profits; creates incentive for continuing innovative R&D projects

C

The federal government funds __________ of the nation's basic research, much of which ____________________________. A. more than half; carried out by private firms B. less than half; conducted in the labs of private firms C. about half; conducted at colleges and universities D. more than half; conducted a government run facilities

C

Which of the following would most likely be recognized as a defining characteristic of a public good? A. the good is nonrivalrous item B. the good is nonexcludable item C. the good is both a and b above D. the good is a separate and identifiable item

C

If the maintenance fees for a lighthouse are paid in full each year by charging port fees, then the lighthouse is A. rivalrous and excludable B. nonrivalrous and excludable C. rivalrous and nonexcludable D. nonrivalrous and nonexcludable

D

Under current U.S. copyright legislation, works produced on a for-hire basis and owned by firms enjoy monopoly protection for A. 50 years after date of publication. B. 70 years after date of publication. C. 75 years from the date of publication. D. 95 years from the date of publication.

D

Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology? A. intellectual property rights B. government research and development grants C. cooperative research ventures between companies D. patents, copyrights, and each of the above

D

Which of the following would some economists be likely to perceive as the most appropriate public policy response to a positive externality created by the development of a highly innovative new technology? A. not taking into account the negative externality associated with social benefit B. not taking into account the positive externality associated with social benefit C. have reasonable rates of return not based on a notion of unearned social benefits D. develop ways to provide a greater share of the social benefits to the innovator

D

While the majority of economists acknowledge that intellectual property rights do provide a method for increasing the rate of return for inventors, some have suggested there are number of reasons to doubt whether patents provide A. sufficient benefits for society as a whole. B. completely appropriate benefits for the whole of society. C. completely appropriate incentives for innovation. D. sufficient incentives for innovation, as well as c.

D