QUESTION 2

1. An innovation is essentially the implementation of an BLANK . A purely competitive industry might be better than a concentrated industry for R & D because it is less BLANK , that is, it must always strive for more productivity. However, BLANK and BLANK industries have a difficult time maintaining a positive rate of BLANK from R & D because of BLANK by other firms into the industry. This characteristic feature of these two market models tends to drive economic BLANK to BLANK in the BLANK .

QUESTION 3

1. Oligopolistic industries might be better suited for R & D because it could maintain the potential BLANK that could be earned because of the BLANK into the industry. Also, the oligopolistic firm, because of its large size, could more easily BLANK the large investment usually required of R & D and BLANK the cost of R & D expenditures that did not produce profitable results over a large amount of units of output.

QUESTION 4

1. Graph 1 on the resource sheet illustrates the array of the investment opportunities that the CFO of Acme Widget Corporation presented to the board of directors at their annual meeting in Napa Valley. The vertical axis represents the anticipated rate of return on investment from each of the potential investment projects (A through F). The horizontal axis represents the dollar amount of theprincipal required to implement the project. Note that the projects are listed in descending order of the anticipated rate of return. The line marked rrr (required rate of return) represents the interest rate cost of funds as describe in the textbook. Given this information, this firm will undertake BLANK (enter a number no decimal points, no dollar signs, comma ok) worth of investment. If the interest rate cost of funds were to rise to 12%, this firm would undertake BLANK (enter a number no decimal points, no dollar signs, comma ok) worth of investment.

QUESTION 5

1. The inverted U curve suggests that the best market structure for R & D might be some combination of BLANK and BLANK , but the worst is clearly BLANK and BLANK . While technological change may produce some negative ramifications in the economy, generally we like it because it makes goods and services BLANK and better. It also increases both BLANK and efficiency