Deck 16: The Knowledge Economy

Question 1

Dominant firms tend to lag in innovation because

A)of the sunk cost effect.
B)entrepreneurs are found in smaller firms.
C)they are usually focused on market share.
D)all of these choices.

Answer 1

all of these choices.

Question 2

If increasing returns is in effect

A)average costs rise.
B)marginal costs rise.
C)marginal costs fall.
D)average revenue is constant.

Answer 2

marginal costs fall.

Question 3

Marginal costs and marginal benefits

A)do not include sunk costs.
B)include sunk costs.
C)are really just fixed costs.
D)are not useful in decision making.

Answer 3

do not include sunk costs.

Question 4

Increasing returns means that

A)each additional worker produces more than the worker before him/her.
B)each additional worker costs less.
C)marginal cost rises.
D)technology is having a negative impact on production.

Question 5

In the knowledge economy

A)the supply chain has been decomposed.
B)property rights have been altered.
C)increasing returns may occur more often.
D)all of these choices.

Question 6

Knowledge workers have

A)relatively less bargaining power.
B)relatively more bargaining power.
C)constant bargaining power.
D)the management structure above them.

Question 7

If a seller incurs an obligation to generate an ancillary obligation of a certain value to offset the initial buyer's capital expenditure, then there is a(n)____ in place.

A)spot contract
B)buyback contract
C)offset contract
D)enforceable contract

Question 8

In the knowledge economy

A)physical property rights appear to be lacking.
B)property rights have become stronger.
C)property rights have been replaced by network externalities.
D)intellectual property rights appear to be lacking.

Question 9

For patents to be effective

A)small networks.
B)network externalities must be realized.
C)property rights need to be enforced.
D)there needs to be fewer economies of scope.

Question 10

If marginal costs are virtually zero after initial units are produced

A)inventors need to sell lots of units to make money.
B)inventors need to be paid upfront.
C)inventors need to sell their patents.
D)none of these choices.

Question 11

The value of a network

A)is related to how many are in the network.
B)is not related to how many are in the network.
C)is related to its impact on diminishing marginal returns.
D)none of these choices.

Question 12

Entrepreneurs

A)and managers are found on the same organizational level.
B)are usually found in small firms.
C)are usually found in larger firms in order to access financial capital.
D)are found in firms of all sizes.

Question 13

Information

A)is difficult to own.
B)is never a separate attribute of a product.
C)is easy to connect to physical product.
D)is not scarce in the knowledge economy.

Question 14

One of the results of the knowledge economy

A)is that content matters.
B)is that the information content of a good can be distinguished from the physical product.
C)is that the information content of a good cannot be distinguished from the physical product.
D)is that the physical features of the product has become more important.

Question 15

If a knowledge worker knows more than has manager it makes

A)sense to have a hierarchy organization.
B)sense for the manager to closely monitor the employee.
C)sense to promote the employee.
D)no sense for the manager to monitor the employee.

Question 16

An organization with hierarchy

A)is needed to define property rights between knowledge workers.
B)remains an effective way to manage knowledge workers.
C)is not an effective way to manage knowledge workers.
D)none of these choices.

Question 17

Diminishing marginal returns to labor means

A)that each additional worker costs more.
B)that each additional worker produces less than the previous worker.
C)that each additional worker costs less.
D)that total product grows at a constant rate when workers are added to production.

Question 18

Workers who deal with information are generally referred to as

A)non-productive workers.
B)production workers.
C)knowledge workers.
D)migrant workers.

Question 19

If diminishing marginal returns is in effect

A)marginal costs fall.
B)marginal costs rise.
C)average costs fall.
D)average revenue is constant.

Question 20

Some products of the knowledge economy

A)have an initial marginal cost that is very low and then rises.
B)have no marginal costs.
C)have an initial marginal cost that is very high and then falls to zero.
D)none of these choices.

Question 21

Intellectual property rights are difficult to protect.

Question 22

Knowledge workers are becoming more common relative to production workers.

Question 23

Increasing returns

A)causes marginal cost to remain constant.
B)causes marginal cost to rise.
C)causes marginal cost to fall.
D)causes marginal product to rise but then fall.

Question 24

Websites make money by charging to access the site.

Question 25

Network effects are seen in manufacturing sectors.

Question 26

Knowledge has become measurably more important in today's economy.

Question 27

Entrepreneurs are usually found in smaller firms.

Question 28

Marginal costs rise if there are increasing returns.

Question 29

A network must be small if network externalities are to be huge.

Question 30

It is difficult to create barriers to entry if the information content of a product can be separated from the physical aspects of the product.

Question 31

The information content of a product can never be separated from the physical aspect of the product.

Question 32

Marginal costs rise if marginal product falls.

Question 33

The supply chain has change very little over the past 50 years.

Question 34

Managers must monitor knowledge workers closely.

Question 35

Being first only works

A)if accounting profits are earned in the first year.
B)if the entrepreneur has the working capital of a large firm.
C)in a winner take all situation.
D)all of these choices.

Question 36

If marginal cost is zero a firm can still profit through pricing.

Question 37

Government picking winners

A)is the market model.
B)is the central planning model.
C)can be done with really good data.
D)none of these choices.

Question 38

If a firm experiences decreases in the per-unit costs of production as its network increases, then this firm is experiencing

A)economies of scope.
B)economies of scale.
C)network externalities.
D)differentiation.

Question 39

If marginal costs are falling and below average costs, then average costs must be falling too.

Question 40

If a firm has large start-up costs and nearly zero marginal costs

A)the firm can profit by focusing on total cost.
B)the firm cannot profit competing on marginal cost.
C)the firm can make money by simply charging a price.
D)the firm can profit competing on marginal cost.