81.Suppose that a firm’s legal staff concludes that a new production process that the firm is developing is patentable. Graphically, this new information would shift the firm’s expected-rate-of-return curve on R&D to the:

A.right and reduce its optimal amount of R&D.

B.right and increase its optimal amount of R&D.

C.left and increase its optimal amount of R&D.

D.left and reduce its optimal amount of R&D.

82.A patent on a new product benefits the firm securing it by:

A.limiting the direct imitation of the product by rivals for many years.

B.enabling the firm to retain “trade secrets” about the product.

C.reducing the firm’s legal expenses.

D.increasing the speed of diffusion of the new product.

83.Even where imitation is possible, a firm may gain advantage from being the first to introduce an innovative product because of:

A.long-lasting brand-name recognition.

B.a time lag between innovation and imitation by rivals.

C.trade secrets that limit the ability of rivals to exactly imitate the product.

D.all of these.

84.Which of the following supports the contention that pure competitors have a weak incentive to engage in R&D?

A.Entry to purely competitive industries is easy and thus profit from innovation is quickly competed away.

B.In pure competition, products are already highly differentiated.

C.Most purely competitive industries are increasing-cost industries.

D.Pure competitors are happy to earn only a normal profit.

85.Which of the following supports the contention that pure competitors have a strong incentive to engage in R&D?

A.Entry to purely competitive industries is easy and thus profit from innovation is quickly competed away.

B.Pure competitors cannot risk being complacent about innovation because a new product, production technique, or distribution method could undermine their normal profit and drive them out of the market.

C.Most purely competitive industries are increasing-cost industries.

D.Pure competitors are happy to earn only a normal profit.

86.Which of the following supports the contention that monopolistic competitors have a strong incentive to engage in R&D?

A.Entry to monopolistic competitive industries is relatively easy and thus profit from innovation is quickly competed away.

B.Most monopolistic competitive industries are decreasing-cost industries.

C.The desire to differentiate products from competitors may motivate monopolistic competitors to engage in R&D.

D.Monopolistic competitors have large retained earnings that are available to finance R&D.

87.Which pair of market structures provides firms with the greatest ability to finance R&D out of retained earnings?

A.Oligopolists and pure monopolists.

B.Pure competitors and pure monopolists.

C.Pure competitors and monopolistic competitors.

D.Monopolistic competitors and pure monopolists.

88.Economists who contend that oligopolists have a strong incentive to engage in R&D say that:

A.the undistributed profits of oligopolists give them a source of readily available, relatively low-cost funds for financing R&D.

B.entry barriers enable oligopolists to sustain the profit it gains from innovation.

C.the large size of oligopolists’ R&D departments allows them to use very specialized, expensive R&D equipment and employ teams of specialized researchers.

D.all of these are true.

89.Those who contend that oligopolists are less likely than more competitive firms to engage in R&D say that:

A.oligopolists have little incentive to introduce costly new technology and produce new products when they currently are earning large economic profit using existing technology and selling existing products.

B.the undistributed profits of oligopolists give them a source of readily available, relatively low-cost funds for financing R&D.

C.entry barriers enable oligopolists to sustain the profits they gain from innovation.

D.the large size of oligopolists’ R&D departments allows them to use very specialized, expensive R&D equipment and employ teams of specialized researchers.

90.In the inverted-U theory of R&D:

A.process innovation and product innovation are inversely related.

B.technological change is inversely related to scientific discovery.

C.R&D expenditures rise continuously as a percentage of firms’ sales as industry concentration rises.

D.R&D expenditures first rise as a percentage of firms’ sales as industry concentration increases, but then fall as higher industry concentration occurs.