On balance, does market power promote or retard technological innovation?
What will be an ideal response?
The evidence is not clear-cut. While small competitive firms have great incentive to innovate to gain a competitive edge over rivals, larger firms have greater resources to devote to research.
On the question of firm size and R&D spending, there is evidence that competitive industries with very small firms devote fewer resources to R&D. Up to a point, R&D rises and rates of innovation rise with firm size. However, some of the most significant innovations in the twentieth century have been introduced by small firms. Examples include electric lighting, photocopiers, and electronic calculators. It should be noted, though, that large firms are often superior marketers of technological innovations where small firms are not.
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Why do economists abstract, and is it appropriate?
What will be an ideal response?
If the Federal Reserve wanted to change the money supply in the economy, it would be least likely to
A) change the federal funds rate. B) sell bonds on the open market. C) change the level of reserves required to be held by banks. D) buy bonds on the open market.
The sale of all alcoholic beverages is taxed in Budopia. If the demand for alcohol in Budopia is perfectly inelastic, how much of the tax burden will be borne by the consumers and why?
What will be an ideal response?
Other things constant, a decrease in consumer income will
a. decrease the demand for large-screen television sets. b. increase the demand for large-screen television sets. c. cause a movement along the demand curve for large-screen television sets, but it will not shift the demand curve. d. have no impact on the quantity demanded or the demand curve for large-screen television sets.