(a) (2 points) Consider a hypothetical industry. If firms that perform R&D make product innovations

five (5) times as often compared to firms that don't, and 10% of the firms perform R&D, how much of

the overall product innovation in is achieved by firms that do perform R&D?

(b) (2 points) In this hypothetical industry, if performing R&D makes process innovation

nine (9) times as likely and 10% of the firms in the industry perform R&D, how much of the process innovation is

achieved by firms that perform R&D?