Chapter 13

4. An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a ______________. A. tax evader B. excludable C. free rider D. nonexcludable

C. free rider

14. 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. have less incentive to innovate to the extent that the whole of society desires.

17. Once its 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. monopoly profits; offers an incentive for research and development to take place

13. 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. private benefits of an action are less

7. In the case of technology, it can sometimes be quite difficult for ______________ to earn a ____________ rate of return from their inventions. A. individuals; high B. public investors; low C. private investors; reasonable D. the whole of society; high

C. private investors; reasonable

19. 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. would benefit from the lower price and greater quantity sold.

11. Which of the following would be classified as a positive externality? A. a surcharge for ambulance service is shifted to property taxes B. reselling outdated textbooks to under-funded public schools C. removing government education subsidies for public schools D. converting a derelict empty lot to a public vegetable garden

D. converting a derelict empty lot to a public vegetable garden

15. 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. develop ways to provide a greater share of the social benefits to the innovator

1. When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being A. unexcludable B. free rider C. public good D. nonexcludable

D. nonexcludable

16. 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. patents, copyrights, and each of the above

9. Many economists would view market competition as supporting the invention of new technology because it A. provides a competitive edge over competitors for the long-term. B. encourages methods of producing existing products at less cost. C. encourages creation of products with desirable characteristics. D. provides short-term above-normal profits, and b and c as well.

D. provides short-term above-normal profits, and b and c as well.

10. A highly innovative firm operating in a competitive market will usually have A. a permanent edge over its competitors. B. a lack of ability to earn reasonable profits. C. vast numbers of competitors catching up to its innovations. D. some time before competitors catch up to its innovations.

D. some time before competitors catch up to its innovations.

6. Which of the following would most likely be identified as being the ultimate goal of public policies that pertain to technology? A. to help inventors earn higher rates of return B. to help inventors earn reasonable returns C. to encourage a stream of inventions that monetarily benefit the inventor. D. to encourage a stream of invention that benefits the whole of society.

D. to encourage a stream of invention that benefits the whole of society.

20. 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. earn a hearty return; charge a high monopoly price permanently

18. 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. invention and competition; invention and monopoly

3. In order for a good to be classified as ______________, when one person uses the good, others are also able to use it. A. nonrivalrous B. unrivalrous C. unexcludable D. nonexcludable

A. nonrivalrous

12. 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. private costs of an action are less

2. A public good is a good that is ____________________, and thus is difficult for market producers to sell to individual consumers. A. excludable or rivalrous B. nonexcludable and nonrivalrous C. excludable and rivalrous D. unexcludable or unrivaled

B. nonexcludable and nonrivalrous

8. Market competition can provide _______________ for _________________, A. unsustained profits; firms with marketable patents B. the needed incentive; discovering new technologies C. time; competitors to catch up with other's inventions D. None of the above.

B. the needed incentive; discovering new technologies

5. If large numbers of individuals choose to behave as free riders, A. more of the public good will be available for paying riders. B. the public good may never be provided. C. public goods will quickly be privatized. D. public domain technologies become more difficult to obtain.

B. the public good may never be provided.