Question 1

Raven Farms raises a substantial number of bees and uses the honey to produce its own skin healing cream. Raven Farms is situated next to the Oakcreek Apple Orchard. The bees from Raven Farms pollinate Oakcreek's apple trees. In this instance, Raven Farms

Accepted Answer

Raven Farms provides more social benefits through the pollination of Oakcreek's apple trees, which benefits the broader community and ecosystem, beyond the private benefits it gains from using the honey for its skin healing cream.

Question 2

How does the cost of financial capital influence innovative research and development activities in a competitive market?

Accepted Answer

At a low cost of financial capital, firms are more likely to invest in research and development (R&D) activities because the lower cost of borrowing or obtaining funds makes it easier to finance these projects, which are often risky but can yield high returns if successful. This encourages innovation and development.

Question 3

Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology?

Accepted Answer

All the options listed (intellectual property rights, government research and development grants, and cooperative research ventures between companies) are mechanisms that can increase the rate of return for inventors of new technology by providing financial support, legal protection, and collaborative opportunities to enhance innovation and commercialization. Patents and copyrights are forms of intellectual property rights, making D the comprehensive choice that includes all the mechanisms mentioned.

Question 4

Why did Gordon Gould have to endure a lengthy legal battle in order to receive a patent for his innovative laser idea concocted in 1957?

Accepted Answer

Gordon Gould delayed applying for a patent because he mistakenly believed he needed to build a working laser before he could file a patent application. This misunderstanding led to a protracted legal battle to secure the patent rights for his laser invention.

Question 5

Some studies done by economists have found that the original inventor receives _______
From innovations, while other businesses and new product users receive the rest of the benefit.

Accepted Answer

The answer of Some studies done by economists have found...

Question 6

If a firm's efforts to be technologically innovative will create a positive externality, then that firm will likely

Accepted Answer

When a firm's innovation efforts create positive externalities, it means that society at large benefits from the innovation more than the firm itself does through direct profits. This discrepancy can lead to the firm having less incentive to innovate to the full extent that would be beneficial for society, because it cannot capture all the benefits of its innovation.

Question 7

If some of the products developed by I'mASoftwareCo. must face market competition that can very quickly produce either an identical product or a close substitute for it, then

Accepted Answer

If some of the products developed by I'mASoftwareCo. must face market competition that can very quickly produce either an identical product or a close substitute for it, then it may decide against R&D projects of this sort.

Question 8

Which of the following would be classified as a positive externality?

Accepted Answer

A positive externality occurs when a third party benefits from an economic activity they are not directly involved in. Converting a derelict empty lot into a public vegetable garden benefits the community by providing green space, fresh produce, and possibly improving the area's aesthetics and safety, without the community members directly participating in the conversion process.

Question 9

Which of the following is the most appropriate response of public policy to a negative externality like pollution?

Accepted Answer

The most appropriate response to a negative externality like pollution is to find ways to incorporate the social costs of that externality into economic decisions. This can involve taxes, regulations, or other mechanisms that make the party causing the pollution bear the full cost of their actions, thereby reducing the externality.

Question 10

Why did Thomas Edison vow that he would work only on ideas for things that people would buy?

Accepted Answer

Edison vowed to work only on ideas for things that people would buy after his experience with his first patented invention, an electric vote recorder, which no government wanted to buy. This experience taught him the importance of market demand for the success of an invention.

Question 11

I'mAComputerCo. would likely be more willing to undertake an innovative research project to reduce the amount of electricity required to run its computers if there were some form of guarantee that if it succeeded,

Accepted Answer

The option that provides a strong incentive for a company to invest in innovative research is the prospect of having a monopoly, even if temporary. This would allow the company to fully capitalize on its investment by selling its new, more efficient computers without competition, ensuring a return on its investment and potentially significant profits.

Question 12

Which of the following would some economists be likely to perceive as the most appropriate public policy response to a positive externality created by the development of a highly innovative new technology?

Accepted Answer

Positive externalities occur when the benefits of a good or service extend beyond the direct users, affecting others who did not necessarily contribute to the cost. Economists often suggest that to encourage more of such beneficial activities, policies should aim to ensure that innovators receive a greater share of the social benefits they generate. This can incentivize further innovation and development.

Question 13

One reason some economists doubt that patent protection encourages innovation is that economic studies show that inventors receive only _______ of the total economic value of their inventions in countries that _______.

Accepted Answer

Economic studies indicate that inventors typically capture only a fraction (one-third to one-half) of the total economic value of their inventions in countries with established patent systems, suggesting that patents may not fully incentivize innovation as intended.

Question 14

When a firm invests in new technology, the _______ that the firm receives are _______.

Accepted Answer

When a firm invests in new technology, it primarily receives private benefits, which are only a portion of the overall social benefits. This is because the innovation can lead to broader economic advantages beyond the firm, such as job creation, improved products for consumers, and advancements in related industries, which are not captured by the firm's private gains.

Question 15

In economic terms, when I'mASoftwareCo. invests in new technology innovations,

Accepted Answer

Positive externalities arise when an investment, such as in new technology innovations, benefits other parties beyond the investor. In this case, I'mASoftwareCo.'s investment could lead to advancements that benefit other companies, consumers, or the economy at large, beyond the direct gains to the company itself.

Question 16

Which of the following circumstances would encourage I'MaPharmaCo. to increase research and development activities?

Accepted Answer

When the cost of financial capital is low, it is cheaper for the company to borrow money or raise funds, making it more feasible to invest in research and development activities.

Question 17

For a positive externality, _______ than the social benefits.

Accepted Answer

The answer of For a positive externality, _______ than the...

Question 18

Once it's patent application has been accepted, a firm is able to earn _______ on its product, which _______.

Accepted Answer

Monopoly profits are earned because the patent gives the firm exclusive rights to produce and sell the product, which offers an incentive for research and development to take place by allowing the firm to capture a larger portion of the benefits from its innovation.

Question 19

For a negative externality, the _______ than the costs imposed on society as a whole.

Accepted Answer

For a negative externality, the private costs incurred by the individual or firm undertaking the action are less than the total costs imposed on society, which include both the private costs and the external costs not accounted for by the market.

Question 20

If a small electric automobile manufacturer is able to gain the social return generated by its electric motor, its demand for financial capital would

Accepted Answer

The answer of If a small electric automobile manufacturer is...

Quiz 13: Positive Externalities and Public Goods