Answer the following statement true (T) or false (F)
1) A firm's optimal amount of R&D occurs where the interest-rate cost of funds and the expected
rate of return are equal.
2) Successful new products enable consumers to increase the total utility they obtain from a
specific amount of their total spending.
3) Process innovation is represented as a downward shift in a firm's total product curve and its
average total cost curve.
4) The theory that R&D expenditures as a percentage of firms' sales first rise, reach a peak, and
then fall with increases in industry concentration is called the inverted-U theory of R&D.
5) The process by which new firms and new products destroy existing dominant firms and their
products is called creative destruction.
1) T
2) T
3) F
4) T
5) T
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Refer to Table 11.1. If exports increase by 20 (X = 100), what is the new equilibrium level of output?
A) 1,825 B) 2,425 C) 7,300 D) 9,700
When the domestic currency is initially overvalued in a fixed exchange rate regime, the central bank must intervene in the foreign exchange market to ________ the domestic currency, thereby allowing the money supply to ________
A) purchase; decline B) sell; decline C) purchase; increase D) sell; increase