Question 1

Firms free ride on the research and development of other firms when they
A)buy a firm's newly developed product,and then give it away to consumers.
B)use knowledge other firms have developed without paying for that knowledge.
C)license a new technology from a firm that developed the new technology.
D)choose a level of research and development that is inefficiently high.
E)file a patent with the appropriate government.

Accepted Answer

Firms free ride on the research and development of other firms when they use knowledge other firms have developed without paying for that knowledge. This is because they are essentially benefiting from the other firms' investments in R&D without having to incur the costs themselves. Option A is incorrect because buying a firm's newly developed product and giving it away to consumers does not necessarily result in free riding on R&D. Option C involves paying for a license to use the technology, which is not free riding. Option D refers to inefficiently high levels of R&D and is not necessarily related to free riding. Option E involves filing a patent to protect one's own R&D, not benefiting from another firm's R&D.

Question 2

Knowledge capital is nonrival in the sense that
A)two people can use the same knowledge to develop and produce a product.
B)firms do not compete to be the first to develop new technologies.
C)no single company can be excluded from the benefits of new technologies.
D)firms can benefit from the research and development of rival firms without paying for that benefit.
E)countries around the world all have access to the same technology.

Accepted Answer

Nonrival goods are goods that can be consumed or utilized by multiple individuals without diminishing their availability for others. In the case of knowledge capital, multiple individuals or firms can use the same knowledge to develop and produce a product, without diminishing the availability of that knowledge for others to use.

Question 3

Technological change is the key to sustaining economic growth.

Accepted Answer

Technological change leads to the development of new products, processes, and industries that can drive economic growth by increasing productivity, creating new jobs, and improving standards of living. Therefore, sustaining economic growth requires continuous improvements in technology.

Question 4

Which of the following government policies would most likely result in an increase in economic growth?
A)a decrease in the life of a patent from 20 years to 15 years
B)a decrease in the interest rate at which the government provides student loans
C)a decrease in government spending on grants issued through the National Institutes of Health
D)decreased copyright protection on music and movies
E)an increase in taxes on research and development spending

Accepted Answer

Lowering the interest rate on student loans would increase access to education and therefore improve the long-term economic prospects of individuals, resulting in increased economic growth. The other options involve decreasing incentives for innovation and research, which would have a negative impact on economic growth.

Question 5

Why do some firms choose not to file for a patent and instead try to keep the results of their research a trade secret?
A)because firms must disclose information about the product or process being patented in a patent application
B)because trade secrets are never divulged
C)because a patent only gives the inventor exclusive rights to a product or process for 5 years
D)because trade secrets provide the same exclusive legal rights to a product as a patent does
E)because legal enforcement of patents is uncertain in North America

Accepted Answer

Some firms may choose not to file for a patent because a patent application requires disclosing information about the product or process being patented, which may give competitors valuable information. By keeping it a trade secret, the firm can keep the information confidential and potentially have a competitive advantage.

Question 6

A patent grants an inventor exclusive rights to a product for how long?
A)14 years
B)17 years
C)20 years
D)50 years
E)the lifetime of the product

Accepted Answer

A patent grants exclusive rights to an invention for 20 years from the date of the patent application filing.

Question 7

Because firms can free ride on the research and development of other firms,
A)firms choose a level of research and development where the marginal cost of research is equal to the economy's marginal return of research.
B)firms choose a level of research and development where the marginal cost of research is above the economy's marginal return of research.
C)firms choose a level of research and development where the marginal cost of research is below the economy's marginal return of research.
D)firms choose a level of research and development where the marginal cost of research is below the individual firm's marginal return of research.
E)firms will always face marginal costs of research and development that exceed their marginal return of research.

Accepted Answer

Due to the possibility of free riding on R&D efforts by other firms, firms will choose a level of R&D where the marginal cost of research is below the economy's marginal return of research, as this will make it more likely that their R&D efforts will result in a competitive advantage, despite the risk of their findings being copied by competitors.

Question 8

Explain how advances in technology are critical to sustaining economic growth,even if capital per hour worked is consistently increasing.Provide a graph of a per-worker production function to support your answer.

Accepted Answer

The answer of Explain how advances in technology are critical...

Question 9

Explain how market economies are generally better able to achieve technological progress than are centrally planned economies.

Accepted Answer

The answer of Explain how market economies are generally better...

Question 10

Which factors explain labour productivity?
A)technological change; the quantity of labour per hour worked
B)diminishing returns; the quantity of labour per hour worked
C)diminishing returns; the quantity of capital per hour worked
D)technological change; the quantity of capital per hour worked
E)population; the unemployment rate; and minimum wages

Accepted Answer

Labour productivity is affected by both technological change and the quantity of capital per hour worked. Technological change allows for more advanced equipment and processes, while having more capital means that there are more resources available to workers, allowing them to be more productive. However, factors like diminishing returns, population, unemployment rate, and minimum wages do not have a direct impact on labour productivity.

Question 11

According to Joseph Schumpeter,economic growth is achieved through
A)focusing only on making old products better rather than inventing new ones.
B)centralizing economic production.
C)a process termed "creative destruction."
D)removing the entrepreneur from the production function.
E)protection of existing firms.

Accepted Answer

Schumpeter believed that economic growth comes from a process he termed "creative destruction," in which entrepreneurs continually invent new products and technologies that disrupt established businesses and create new ones. This process leads to economic growth by constantly creating new opportunities for innovation and growth.

Question 12

Describe the process of "creative destruction" using a specific example.

Accepted Answer

The answer of Describe the process of "creative destruction" using...

Question 13

One drawback of the patent system is that firms must disclose to the public information about the product or process.

Accepted Answer

When a firm applies for a patent, they must provide detailed information about their invention to the public. This can make it easier for competitors to learn about the technology and create similar products, potentially reducing the firm's competitive advantage.

Question 14

An economic growth model
A)explains changes in nominal GDP per capita in the long run.
B)explains changes in real GDP per capita in the long run.
C)explains changes in nominal GDP per capita in the short run.
D)explains changes in real GDP per capita in the short run.
E)explains changes in the unemployment rates in the long run.

Accepted Answer

An economic growth model is used to explain changes in real GDP per capita in the long run. It focuses on increasing the production capacity of an economy through increasing labor, capital, and technological advancement, which leads to an increase in real GDP per capita over time.

Question 15

Human capital refers to the percentage of the working-age population in the labour force.

Accepted Answer

Human capital refers to the knowledge, skills, and abilities possessed by individuals that enable them to create economic value in the workforce. It is not specifically related to the percentage of the working-age population in the labour force.

Question 16

Which of the following government provisions would help increase the accumulation of knowledge capital?
A)patents
B)copyrights
C)education subsidies
D)All of the above are correct.

Accepted Answer

Patents and copyrights provide incentives for producers to invest in knowledge capital, as they can protect their intellectual property rights and have the potential for financial gain. Education subsidies help individuals gain the skills and knowledge necessary to contribute to the accumulation of knowledge capital. Therefore, all of the options listed can help increase the accumulation of knowledge capital.

Question 17

Is knowledge capital subject to the law of diminishing returns? Explain.

Accepted Answer

The answer of Is knowledge capital subject to the law...

Question 18

Creative destruction means that
A)firms develop new products that replace old products in the economy,thereby encouraging economic growth.
B)economic growth can only be sustained if capital depreciates rapidly.
C)knowledge capital can be created through a system of government subsidies for education and research and development.
D)research and development should only be financed if research and development is incremental (a result of making small changes to existing products).
E)breaking up existing companies using competition law is required for economic growth.

Accepted Answer

Creative destruction is the process by which firms introduce new and innovative products, technologies or services that disrupt and ultimately replace existing ones. This process encourages economic growth by creating new industries and jobs while phasing out less efficient and less productive ones.

Question 19

Starting at point B in the diagram below,identify which combinations of points illustrate technological change.Give a brief explanation to support your answer.  Alt text for Question 46: For question 46,a graph illustrating technological change.
Long description for Question 46: The x-axis is labelled,capital per hour worked,K/L.The y-axis is labelled,real GDP per hour worked,Y/L.3 concave curves originating from 0 at the vertex are shown.5 points,A ($50000,$15000),B ($60000,$16000),C ($70000,$16400),D ($60000,$17000),and E ($60000,$15000)are plotted.The curve labelled Production function 1,passes through point E.The curve labelled Production function 2,passes through points A,B,and C.The curve labeled Production function 3,passes through point D.The 5 points are connected to their respective coordinates on the x and y-axis with dotted lines.

Accepted Answer

The answer of Starting at point B in the diagram...

Question 20

Provide examples of three kinds of government policies that can help increase the accumulation of knowledge capital and explain why government policies are often necessary to encourage the accumulation of knowledge capital.

Accepted Answer

The answer of Provide examples of three kinds of government...

Quiz 7: Long-Run Economic Growth: Sources and Policies

Firms free ride on the research and development of other firms when they

Knowledge capital is nonrival in the sense that

Technological change is the key to sustaining economic growth.

Which of the following government policies would most likely result in an increase in economic growth?

Why do some firms choose not to file for a patent and instead try to keep the results of their research a trade secret?

A patent grants an inventor exclusive rights to a product for how long?

Because firms can free ride on the research and development of other firms,

Explain how advances in technology are critical to sustaining economic growth,even if capital per hour worked is consistently increasing.Provide a graph of a per-worker production function to support your answer.

Explain how market economies are generally better able to achieve technological progress than are centrally planned economies.

Which factors explain labour productivity?

According to Joseph Schumpeter,economic growth is achieved through

Describe the process of "creative destruction" using a specific example.

One drawback of the patent system is that firms must disclose to the public information about the product or process.

An economic growth model

Human capital refers to the percentage of the working-age population in the labour force.

Which of the following government provisions would help increase the accumulation of knowledge capital?

Is knowledge capital subject to the law of diminishing returns? Explain.

Creative destruction means that

Provide examples of three kinds of government policies that can help increase the accumulation of knowledge capital and explain why government policies are often necessary to encourage the accumulation of knowledge capital.