chapter 12 econ question

Refer to the above diagram. At output C production will result in an economic profit. Select one: True False

True

Refer to the above diagrams. The demand for Firm A's product is perfectly elastic. Select one: True False

True

Successful new products enable consumers to increase the total utility they obtain from a specific amount of their total spending. Select one: True False

True

A firm's optimal amount of R&D occurs where the marginal benefit of this activity exceeds marginal cost by the greatest amount. Select one: True False

False

A rational consumer will cease purchasing a product at that quantity where marginal utility begins to diminish. Select one: True False

False

An income elasticity coefficient of - 1.8 means the product is a normal good. Select one: True False

False

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. Select one: True False

False

Economic profit is found by subtracting accounting costs from total revenue. Select one: True False

False

Immigration of workers is an example of a goods and services flow: Select one: True False

False

In a purely competitive industry competition centers more on advertising and sales promotion than on price. Select one: True False

False

Innovation is the first discovery of a new product or production process; invention is the first successful commercial introduction of the product or process. Select one: True False

False

Process innovation is represented as a downshift in a firm's total product curve and its average total cost curve. Select one: True False

False

Terms of trade of 1X=5Y will be acceptable to two countries that have domestic opportunity costs of 1X=4Y and 1X=1Y, respectively. Select one: True False

False

The invisible hand refers to the many indirect controls that the Federal government imposes in a market system. Select one: True False

False

A tax is progressive if the average tax rate rises as income increases. Select one: True False

True

Average fixed costs diminish continuously as output increases. Select one: True False

True

Graphically, the consumer maximizes total utility where the budget line is tangent to an indifference curve. Select one: True False

True

A firm that produces a single product but owns plants in many different stages of the production process-for example, a steel producer that owns iron ore mines and rolling mills-best illustrates a: Select one: a. vertically integrated firm. b. multinational corporation. c. virtual corporation. d. conglomerate.

a

Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased: Select one: a. total cost at first increases at a decreasing rate and then increases at an increasing rate. b. total variable cost at first increases at an increasing rate and then increases at a decreasing rate. c. average total cost at first increases and then diminishes. d. average fixed cost will rise beyond the point of diminishing returns.

a

Construction of the first working computer "mouse" best exemplifies: Select one: a. invention. b. scientific determinism. c. diffusion. d. creative destruction.

a

Fast-second strategies are more likely to be used by: Select one: a. dominant firms than by startup firms. b. pure competitors rather than oligopolists. c. startup firms rather than existing firms. d. entrepreneurs than by corporations.

a

Global competition: Select one: a. forces domestic producers to become more efficient and to improve product quality. b. drives up prices worldwide. c. reduces employment worldwide. d. creates higher flows of international migration than without trade.

a

How do entrepreneurs differ from "other innovators?" Select one: a. entrepreneurs bear risk; "other innovators" do not. b. "other innovators" bear risk; entrepreneurs do not. c. entrepreneurs only invent; "other innovators" find new markets for inventions. d. entrepreneurs develop entirely new products; "other innovators" focus on product improvements.

a

If a regulatory commission forces a natural monopoly to charge a price equal to its marginal cost: Select one: a. the monopoly may incur a loss. b. resource allocation will be worsened. c. output will decrease. d. the firm will earn only a normal profit.

a

In economists' models, technological advance occurs in: Select one: a. the very long run. b. either the short run, long run, or very long run. c. manufacturing industries but not in service industries. d. pure competition, but not in monopolistic competition, oligopoly, and pure monopoly.

a

In the above diagram, at $40 million of R&D expenditure, the expected rate of return: Select one: a. equals the interest rate cost of funds. b. is greater than the interest rate cost of funds. c. is less than the interest rate cost of funds. d. is negative.

a

In which of the following instances will the effect on equilibrium price be dependent on the magnitude of the shifts in supply and demand? Select one: a. demand rises and supply rises. b. supply falls and demand remains constant. c. demand rises and supply falls. d. supply rises and demand falls.

a

Refer to the above data. At $100 million of R&D expenditures, the: Select one: a. marginal cost of R&D exceeds the marginal benefit. b. marginal benefit of R&D exceeds the marginal cost. c. expected rate of return from R&D is negative. d. firm has exceeded its affordable level of R&D.

a

Refer to the above data. On the basis of the production possibilities data shown: Select one: a. Landia has a comparative advantage in chips while Scandia has a comparative advantage in fish. b. Landia has a comparative advantage in fish while Scandia has a comparative advantage in chips. c. both Landia and Scandia have a comparative advantage in fish. d. both Landia and Scandia have a comparative advantage in chips.

a

Refer to the above diagrams, which pertain to monopolistically competitive firms. Long-run equilibrium is shown by: Select one: a. diagram a only. b. diagram b only. c. diagram c only. d. both diagrams b and c.

a

Refer to the above diagrams. The case of a normal good is represented by figure(s): Select one: a. A. b. B. c. C. d. D

a

The major goods exports of the United States (in dollar volume) are: Select one: a. chemicals, consumer durables, agricultural products, and semiconductors. b. petroleum, automobiles, clothing, and household appliances. c. iron and steel, clothing, beef, and sugar. d. aircraft, glassware, television sets, and furniture.

a

The major source of new scientific knowledge in the United States is: Select one: a. university and government research. b. R&D work in large corporations. c. entrepreneurs working alone. d. purely competitive and monopolistically competitive firms.

a

Which among the following is the strongest determinant of an industry's technological progressiveness? Select one: a. the scientific character of its industry and the number of technological opportunities available. b. the size of the industry concentration ratio; the lower the ratio, the greater the firm's technological progressiveness. c. the Herfindahl index in the firm's industry; the higher the index value, the greater the firm's technological progressiveness. d. the amount of retained earnings in the industry.

a

Process innovation refers to: Select one: a. development of new products. b. implementation of better methods of producing products. c. first discovery of new scientific principles. d. wide-spread imitation of innovations.

b

(Last Word) Suppose that a firm has "pricing power" and can segregate its market into two distinct groups based on differences in elasticities of demand. The firm might charge: Select one: a. a lower price to the group that has the less elastic demand. b. a higher price to the group that has the less elastic demand. c. the same price to both groups but include a "free" related product for the group that has an inelastic demand. d. the same price to both groups but make it difficult for the group with the more elastic demand to gain access to the product.

b

A perfectly elastic demand curve implies that the firm: Select one: a. must lower price to sell more output. b. can sell as much output as it chooses at the existing price. c. realizes an increase in total revenue which is less than product price when it sells an extra unit. d. is selling a differentiated (heterogeneous) product.

b

A profit-maximizing firm should not undertake a R&D project for which the: Select one: a. expected rate of return exceeds its interest-rate cost of funds. b. interest-rate cost of funds exceeds the expected rate of return. c. expected returns are in the distant future. d. the expected returns, though potentially very large, are uncertain.

b

Broadly defined, technological advance: Select one: a. can occur in either the short run, long run, or very long run. b. comprises new and improved goods and services and new and improved ways of producing or distributing them. c. includes invention but NOT innovation or diffusion. d. includes product innovation, but not process innovation.

b

Creative destruction is: Select one: a. the process by which large firms buy up small firms. b. the process by which new firms and new products replace existing dominant firms and products. c. a term coined many years ago by Adam Smith. d. is applicable to planned economies, but not to market economies.

b

If a pure monopolist is operating in a range of output where demand is elastic: Select one: a. it cannot possibly be maximizing profits. b. marginal revenue will be positive but declining. c. marginal revenue will be positive and rising. d. total revenue will be declining.

b

In a competitive market: Select one: a. external benefits will always exceed external costs. b. resources will be misallocated if government does not properly adjust demand and supply for large external costs and benefits. c. resources will be allocated efficiently only if external benefits equal external costs. d. an efficient allocation of resources is realized even where there are large external costs and benefits.

b

In deciding on an optimal amount and type of research and development, firms should adhere to the rule. Expand R&D until: Select one: a. expected rate of return is zero. b. expected rate of return equals the interest rate. c. expected rate of return exceeds the interest rate by the greatest amount. d. the interest rate is constant.

b

Marginal utility is the: Select one: a. sensitivity of consumer purchases of a good to changes in the price of that good. b. change in total utility obtained by consuming one more unit of a good. c. change in total utility obtained by consuming another unit of a good divided by the change in the price of that good. d. total utility associated with the consumption of a certain number of units of a good divided by the number of units consumed.

b

Other things equal, patents: Select one: a. decrease the expected rate of return on a R&D expenditure. b. increase the expected rate of return on a R&D expenditure. c. increase the interest-rate cost of funds used to finance a R&D expenditure. d. decrease the interest-rate cost of funds used to finance a R&D expenditure.

b

Refer to the above diagram that relates to Firm X. Suppose X implements an innovative new production method that shifts its total product curve from TP2 to TP1. Other things equal: Select one: a. the average product of X's labor would fall. b. the average total cost of X's output would decline. c. X would supply less output at each product price than before. d. the demand curve for X's product would shift to the right.

b

Refer to the above diagram where xy is the relevant budget line and I1, I2, and I3 are indifference curves. Point M: Select one: a. is the consumer's equilibrium position. b. is unobtainable. c. is inferior to point N. d. entails the highest attainable level of total utility.

b

Refer to the above diagram. If this competitive firm produces output Q, it will: Select one: a. suffer an economic loss. b. earn a normal profit. c. earn an economic profit. d. achieve productive efficiency, but not allocative efficiency.

b

Refer to the above diagram. The movement from point b to point c suggests that more: Select one: a. private goods are being produced at the expense of fewer public goods. b. public goods are being produced at the expense of fewer private goods. c. public goods are being produced by employing currently idle resources. d. private goods are being produced by employing currently idle resources.

b

Suppose firm X implements a new process for extracting copper from copper-bearing ore. This is an example of: Select one: a. product innovation. b. process innovation. c. economics of scale. d. the inverted-U theory.

b

The first discovery (as distinct from first commercial application) of a product or process is called: Select one: a. innovation. b. invention. c. creative destruction. d. diffusion.

b

The first discovery, as opposed to first commercial application, of the water-soluble material used in contact lens is an example of: Select one: a. innovation. b. invention. c. creative destruction. d. diffusion.

b

The market system: Select one: a. produces considerable inefficiency in the use of scarce resources. b. effectively harnesses the incentives of workers and entrepreneurs. c. is inconsistent with freedom of choice in the long run. d. has slowly lost ground to emerging command systems.

b

Use the following cost information for the Creamy Crisp Donut Company to answer questions 16-23: Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000 Annual revenue from operations = $380,000 Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000 Entrepreneur's potential economic profit from the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Refer to the above data. If, other things equal, Creamy Crisp's revenue fell to $286,000: a. its implicit costs, including a normal profit, would exceed its explicit costs. b. it would earn a normal profit but not an economic profit. c. it would suffer an economic loss. d. its accounting profit would fall to zero.

b

When a purely competitive firm is in long-run equilibrium: Select one: a. marginal revenue exceeds marginal cost. b. price equals marginal cost. c. total revenue exceeds total cost. d. minimum average total cost is less than the product price.

b

The above diagram concerns supply adjustments to an increase in demand (D1 to D2) in the immediate market period, the short run, and the long run. Supply curves S1, S2, and S3 apply to the: Select one: a. immediate market period, long run, and short run respectively. b. immediate market period, short run, and long run respectively. c. long run, short run, and immediate market period respectively. d. short run, long run, and immediate market period respectively.

c

(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: Select one: a. invention. b. scientific determinism. c. diffusion. d. technological lag.

c

A shift to the right in the demand curve for product A can be most reasonably explained by saying that: Select one: a. consumer incomes have declined and they now want to buy less of A at each possible price. b. the price of A has increased and, as a result, consumers want to purchase less of it. c. consumer preferences have changed in favor of A so that they now want to buy more at each possible price. d. the price of A has declined and, as a result, consumers want to purchase more of it.

c

An effective ceiling price will: Select one: a. induce new firms to enter the industry. b. result in a product surplus. c. result in a product shortage. d. clear the market.

c

In the above diagram curves 1, 2, and 3 represent: Select one: a. average variable cost, marginal cost, and average fixed cost respectively. b. total variable cost, total fixed cost, and total cost respectively. c. total fixed cost, total variable cost, and total cost respectively. d. marginal product, average variable cost, and average total cost respectively

c

Refer to the above data. This industry illustrates: Select one: a. pure competition. b. monopolistic competition. c. oligopoly. d. pure monopoly.

c

Refer to the above diagram in which the downsloping linear lines are budget lines and I1, I 2, and I3 comprise an indifference map. The combinations of products M and N indicated by points 1, 3, and 5 are such that: Select one: a. all three imply the same level of utility. b. 1 and 5 imply a higher level of utility than does 3. c. 3 implies a higher level of utility than does 1 or 5. d. the person is indifferent among the three combinations.

c

Refer to the above diagrams. The case of complementary goods is represented by figure: Select one: a. A. b. B. c. C. d. D.

c

Suppose a firm anticipates that a particular R&D expenditure of $100 million will result in a new product and thus create a one-time added profit of $108 million a year later. The firm will: Select one: a. undertake the R&D expenditure if its interest-rate-cost of borrowing is 12 percent. b. undertake the R&D expenditure if its interest-rate-cost of borrowing is 10 percent. c. not undertake the R&D expenditure if its interest-rate-cost of borrowing is 9 percent. d. not undertake the R&D expenditure if its interest-rate-cost of borrowing is 7 percent.

c

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its: Select one: a. demand curve as being of unit elasticity throughout. b. supply curve as kinked, being steeper below the going price than above. c. demand curve as kinked, being steeper below the going price than above. d. demand curve as kinked, being steeper above the going price than below.

c

Suppose that Book-Cost Busters (BCB), without authorization, reproduced a best-selling novel and placed it for downloading on the BCB pay-for-use website. This action would violate the publisher's: Select one: a. profit rights. b. patent. c. copyright. d. trademark.

c

Suppose that Marlen Fisher has legal protection against anyone producing and selling a fishing lure identical to his unique-action "MarFish" lure, whatever the competitor might name the lure. This legal protection is most likely to be a: Select one: a. trademark. b. restraining order. c. patent. d. copyright.

c

Technological advance is shown as a(n): Select one: a. movement from a point inside a production possibilities curve to a point on the curve. b. movement along a production possibilities curve. c. outward shift of a production possibilities curve. d. inward shift of a production possibilities curve.

c

The corporate decision on type and level of R&D activity is difficult because: Select one: a. the interest-rate cost of funds is difficult to estimate. b. much of corporate R&D is based on the pursuit of science, not on the profit motive. c. expected returns lie in the future and are highly uncertain. d. total returns and marginal returns greatly diverge.

c

The monopolistically competitive firm shown in the above figure: Select one: a. is in long-run equilibrium. b. might realize an economic profit or a loss, depending on its choice of output level. c. cannot operate profitably, at least in the short run. d. can realize an economic profit.

c

The study of economics is primarily concerned with: Select one: a. keeping private businesses from losing money. b. demonstrating that capitalistic economies are superior to socialistic economies. c. choices that are made in seeking the best use of resources. d. determining the most equitable distribution of society's output.

c

Which of the following market structures do economists generally agree is the least conducive to R&D and innovation? Select one: a. monopolistic competition b. pure competition c. pure monopoly d. oligopoly

c

The wide imitation and spread of an innovation is called: Select one: a. innovation. b. invention. c. creative destruction. d. diffusion.

d

(Consider This) The central idea illustrated by the vignette on "catgut" used as violin strings is: Select one: a. patent rights. b. research and development activity. c. derived demand. d. trade secrets.

d

A major source of funding of R&D in large, established corporations is: Select one: a. venture capital. b. dividends. c. mutual funds. d. retained earnings.

d

A normal good is one: Select one: a. whose amount demanded will increase as its price decreases. b. whose amount demanded will increase as its price increases. c. whose demand curve will shift leftward as incomes rise. d. the consumption of which varies directly with incomes

d

As it relates to R&D, the expected-rate-of-return curve, r: Select one: a. usually slopes upward. b. shows the cost of financing various levels of R&D. c. varies in location depending on the location of the interest-rate-cost-of-funds curve, i. d. represents the marginal benefit element in the MB = MC decision framework.

d

From society's point of view the economic function of profits and losses is to: Select one: a. promote the equal distribution of real assets and wealth. b. achieve full employment and price level stability. c. contribute to a more equal distribution of income. d. reallocate resources from less desired to more desired uses.

d

If the demand curve for product B shifts to the right as the price of product A declines, then: Select one: a. both A and B are inferior goods. b. A is a superior good and B is an inferior good. c. A is an inferior good and B is a superior good. d. A and B are complementary goods.

d

The three most important sources of Federal tax revenue in order of descending importance are: Select one: a. sales, payroll, and personal income taxes. b. personal income, corporate income, and sales taxes. c. personal income, corporate income, and payroll taxes. d. personal income, payroll, and corporate income taxes.

d

Refer to the above diagram. The movement from curve (a) to curve (c) suggests an improvement in civilian goods technology but not in war goods technology. Select one: True False

false

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. Select one: True False

true