Economics (McConnell), AP* Edition, 20th Edition

Chapter 13W : Technology, R&D, and Efficiency

*Essay Quiz

1
Give a definition of technological advance. According to economists, what role does time play in the definition?
2
Explain and give examples of invention. What does government do to protect it?
3
How does innovation differ from invention and diffusion? How does innovation affect competition among firms?
4
Compare and contrast the modern view of technological advance with the traditional view.
5
In what ways do entrepreneurs differ from other innovators? In what types of business does each tend to work? How have the characteristics of entrepreneurs changed over time?
6
What does it mean that "innovators try to anticipate the future"? What are the economic consequences of this effort?
7
Why do entrepreneurs and other innovators actively study the scientific output of universities and government laboratories?
8
What are the many different sources of funding to finance firms' R&D expenditures? If an entrepreneur uses personal funds, is there a cost for financing?
9
Explain how the firm decides on the optimal amount of research and development. Use a marginal-cost and marginal-benefit graph in your explanation.
10
Why might many R&D expenditures be affordable but not worthwhile? Are outcomes from R&D guaranteed?
11
Describe how a firm's revenues and profits are increased through product innovation. Why does consumer acceptance of a new product depend on both its marginal utility and price?
12
Explain how process innovation reduces cost and increases profits. Illustrate the point graphically using a total-product and average-cost curve graph.
13
Describe the fast-second strategy and give an example of it.
14
What is the imitation problem resulting from technological advance?
15
Describe the legal protections and potential advantages of taking the lead in innovation.
16
Compare and contrast the suitability of different market structures for fostering technological advance.
17
Explain the basic conclusions from inverted-U theory of R&D. What will be the optimal market structure for technological progress?
18
How does technological advance enhance economic efficiency? Distinguish between its effects on productive efficiency and allocative efficiency.
19
How might innovation create or reduce monopoly power? Why might both effects be possible?
20
Explain the idea of creative destruction as championed by Joseph Schumpeter. What are the objections to that idea?
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