Chapter 01
Introduction
True/False
1. Investing in process innovation helps firms lower their costs.
Answer: True
Difficulty: Easy
Page: 1
2. Flexible manufacturing technologies have increased the importance of production
economies of scale.
Answer: False
Difficulty: Easy
Page: 1
3. Globalization of markets has reduced the importance of innovation.
Answer: False
Difficulty: Easy
Page: 1
4. Innovation and new technologies have led to longer product life cycles and
lowered product obsolescence.
Answer: False
Difficulty: Medium
Page: 2
5. Technological innovation decreases the amount of output achievable from a given
quantity of labor and capital.
Answer: False
Difficulty: Easy
Page: 2
6. GDP does not relate directly to the amount of goods consumers can purchase.
Answer: False
Difficulty: Easy
Page: 3
7. Externalities are costs that are borne by individuals other than those
responsible for creating them.
Answer: True
Difficulty: Easy
Page: 3
8. Technological innovation results in complete eradication of negative
externalities.
Answer: False
Difficulty: Easy
Page: 3
,9. If a business discharges untreated chemical waste into local water bodies, it
imposes a negative externality on the community members.
Answer: True
Difficulty: Medium
Page: 3
10. Firms that charge headlong into new product development usually have short
development cycles.
Answer: False
Difficulty: Medium
Page: 4
11. Most innovative ideas do not become successful new products.
Answer: True
Difficulty: Easy
Page: 4
12. The majority of effort and money invested in technological innovation comes
from non-industrial firms.
Answer: False
Difficulty: Medium
Page: 4
13. The innovation process is often conceived of as a funnel, because most
potential new product ideas make it through the development process.
Answer: False
Difficulty: Easy
Page: 5
14. According to the concept of innovation funnel, the number of successful
products launched will be greater than the number of raw ideas generated.
Answer: False
Difficulty: Easy
Page: 5
15. According to the concept of the innovation funnel, one new idea is usually
responsible for several new products.
Answer: False
Difficulty: Medium
Page: 5
16. A firm’s organizational structure and control systems have no influence on the
generation of innovative ideas.
Answer: False
Difficulty: Medium
Page: 5
Multiple Choice
17. Technological innovations decrease:
a. the variety of goods consumers can purchase.
,b. the need for differentiation among competitors.
c. the time required to design and produce new products.
d. the use of common components between different models of the same product.
Answer: c
Difficulty: Easy
Page: 1
18. As a result of the rapid pace of innovation:
a. product life cycles have become short.
b. product development cycles have become long.
c. market segmentation has reduced.
d. product obsolescence has slowed down.
Answer: a
Difficulty: Easy
Page: 2
19. The _____ of an economy is its total annual output, measured by the final
purchase price.
a. balance of payment
b. gross domestic product
c. cash reserve ratio
d. net national income
Answer: b
Difficulty: Easy
Page: 2
20. Which of the following is true of technological innovations?
a. Technological innovations help increase a country’s gross domestic product.
b. Technological innovations decrease the amount of output achievable from a given
quantity of labor and capital.
c. Technological innovations slow down the product development cycles and product
obsolescence.
d. Technological innovations increase production costs and reduce product
differentiation.
Answer: a
Difficulty: Easy
Page: 2
21. Virtual Inc., a manufacturing company, has recently entered into the cell phone
industry. This industry is characterized by rapid technological innovations. Which
of the following is an implication for Virtual Inc.?
a. The life cycle of its cell phones will be very long.
b. It will face rapid product obsolescence.
c. It will face low market segmentation in the cell phone industry.
d. It will face lower need for product differentiation.
Answer: b
Difficulty: Hard
Page: 2
22. Technological innovations increase:
a. the gross domestic product of an economy.
b. product life cycles.
c. the time required for product development and introduction.
d. the production costs of multiple product variations.
, Answer: a
Difficulty: Medium
Page: 2
23. If a country’s GDP stands at 4,867 billion USD, it means the country’s ____ is
worth 4,867 billion USD.
a. total annual output
b. investment on technological innovation
c. savings with the World Bank
d. negative variance in budget
Answer: a
Difficulty: Medium
Page: 2
24. The Solow Residual refers to the:
a. obsolete products left in the market due to the accelerated product life cycle.
b. less developed nations of the world being left behind due to their obsolete
technology.
c. increased amount of output achievable from a given quantity of labor and capital
due to technological innovation.
d. process of dumping goods in developing and underdeveloped countries at a price
lower than the home-market price.
Answer: c
Difficulty: Medium
Page: 2-3
25. _____ refer to costs (or benefits) of technological innovations that are borne
by individuals other than those responsible for creating them.
a. Externalities
b. Innovation funnels
c. Opportunity costs
d. Cultural lags
Answer: a
Difficulty: Easy
Page: 3
26. Silk Work Inc., a manufacturer of silk garments, is planning to replace hand
weaving with some modern machines that run on fuel. Which of the following
consequences of this measure can be categorized as a negative externality?
a. Increased amount of output achievable from the given quantity of labor
b. Increase in the quality of the silk garments
c. Increased pollution as a result of the new technology
d. Increased need for investment to finance the modernization
Answer: c
Difficulty: Medium
Page: 3
27. Technology is in its purest essence _____.
a. knowledge
b. trial and error
c. experimentation
d. guesswork
Introduction
True/False
1. Investing in process innovation helps firms lower their costs.
Answer: True
Difficulty: Easy
Page: 1
2. Flexible manufacturing technologies have increased the importance of production
economies of scale.
Answer: False
Difficulty: Easy
Page: 1
3. Globalization of markets has reduced the importance of innovation.
Answer: False
Difficulty: Easy
Page: 1
4. Innovation and new technologies have led to longer product life cycles and
lowered product obsolescence.
Answer: False
Difficulty: Medium
Page: 2
5. Technological innovation decreases the amount of output achievable from a given
quantity of labor and capital.
Answer: False
Difficulty: Easy
Page: 2
6. GDP does not relate directly to the amount of goods consumers can purchase.
Answer: False
Difficulty: Easy
Page: 3
7. Externalities are costs that are borne by individuals other than those
responsible for creating them.
Answer: True
Difficulty: Easy
Page: 3
8. Technological innovation results in complete eradication of negative
externalities.
Answer: False
Difficulty: Easy
Page: 3
,9. If a business discharges untreated chemical waste into local water bodies, it
imposes a negative externality on the community members.
Answer: True
Difficulty: Medium
Page: 3
10. Firms that charge headlong into new product development usually have short
development cycles.
Answer: False
Difficulty: Medium
Page: 4
11. Most innovative ideas do not become successful new products.
Answer: True
Difficulty: Easy
Page: 4
12. The majority of effort and money invested in technological innovation comes
from non-industrial firms.
Answer: False
Difficulty: Medium
Page: 4
13. The innovation process is often conceived of as a funnel, because most
potential new product ideas make it through the development process.
Answer: False
Difficulty: Easy
Page: 5
14. According to the concept of innovation funnel, the number of successful
products launched will be greater than the number of raw ideas generated.
Answer: False
Difficulty: Easy
Page: 5
15. According to the concept of the innovation funnel, one new idea is usually
responsible for several new products.
Answer: False
Difficulty: Medium
Page: 5
16. A firm’s organizational structure and control systems have no influence on the
generation of innovative ideas.
Answer: False
Difficulty: Medium
Page: 5
Multiple Choice
17. Technological innovations decrease:
a. the variety of goods consumers can purchase.
,b. the need for differentiation among competitors.
c. the time required to design and produce new products.
d. the use of common components between different models of the same product.
Answer: c
Difficulty: Easy
Page: 1
18. As a result of the rapid pace of innovation:
a. product life cycles have become short.
b. product development cycles have become long.
c. market segmentation has reduced.
d. product obsolescence has slowed down.
Answer: a
Difficulty: Easy
Page: 2
19. The _____ of an economy is its total annual output, measured by the final
purchase price.
a. balance of payment
b. gross domestic product
c. cash reserve ratio
d. net national income
Answer: b
Difficulty: Easy
Page: 2
20. Which of the following is true of technological innovations?
a. Technological innovations help increase a country’s gross domestic product.
b. Technological innovations decrease the amount of output achievable from a given
quantity of labor and capital.
c. Technological innovations slow down the product development cycles and product
obsolescence.
d. Technological innovations increase production costs and reduce product
differentiation.
Answer: a
Difficulty: Easy
Page: 2
21. Virtual Inc., a manufacturing company, has recently entered into the cell phone
industry. This industry is characterized by rapid technological innovations. Which
of the following is an implication for Virtual Inc.?
a. The life cycle of its cell phones will be very long.
b. It will face rapid product obsolescence.
c. It will face low market segmentation in the cell phone industry.
d. It will face lower need for product differentiation.
Answer: b
Difficulty: Hard
Page: 2
22. Technological innovations increase:
a. the gross domestic product of an economy.
b. product life cycles.
c. the time required for product development and introduction.
d. the production costs of multiple product variations.
, Answer: a
Difficulty: Medium
Page: 2
23. If a country’s GDP stands at 4,867 billion USD, it means the country’s ____ is
worth 4,867 billion USD.
a. total annual output
b. investment on technological innovation
c. savings with the World Bank
d. negative variance in budget
Answer: a
Difficulty: Medium
Page: 2
24. The Solow Residual refers to the:
a. obsolete products left in the market due to the accelerated product life cycle.
b. less developed nations of the world being left behind due to their obsolete
technology.
c. increased amount of output achievable from a given quantity of labor and capital
due to technological innovation.
d. process of dumping goods in developing and underdeveloped countries at a price
lower than the home-market price.
Answer: c
Difficulty: Medium
Page: 2-3
25. _____ refer to costs (or benefits) of technological innovations that are borne
by individuals other than those responsible for creating them.
a. Externalities
b. Innovation funnels
c. Opportunity costs
d. Cultural lags
Answer: a
Difficulty: Easy
Page: 3
26. Silk Work Inc., a manufacturer of silk garments, is planning to replace hand
weaving with some modern machines that run on fuel. Which of the following
consequences of this measure can be categorized as a negative externality?
a. Increased amount of output achievable from the given quantity of labor
b. Increase in the quality of the silk garments
c. Increased pollution as a result of the new technology
d. Increased need for investment to finance the modernization
Answer: c
Difficulty: Medium
Page: 3
27. Technology is in its purest essence _____.
a. knowledge
b. trial and error
c. experimentation
d. guesswork
