Econ 2302 Final Exam| Verified Solution

ECON 2302 FINAL EXAM| VERIFIED SOLUTION ECONOMICS EXAM 3 1.Technology, R & D, and Efficiency. a.Thoroughly and completely explain Invention Invention is the discovery of a product or process through the use of imagination, ingenious thinking, and experimentation and the first proof that it will work. Usually based on scientific knowledge and is the product of individuals, either working on their own or as members of an organization - R&D staff. We live on a planet with finite resources which makes continued economic growth difficult to maintain. If we are seeing economic growth rates flatten out, please explain how invention might be impacted by a slow growth /no growth economy, and what can we do about this problem? Invention as a result: Invention as a result can be identified as a new and the purpose is beyond its tangible existence. The level of utility is very high. The absence of utility in an invention makes it a mere process not invention. Invention as a process: The idea for an invention may be developed on paper or on a computer, by writing or drawing, by trial and error, by making models, by experimenting, by testing and/or by making the invention in its whole form. Example of example as a result and as a process: The Depression of the 1930’s lasted 11 years and the fact that we are 6 years into the great recession. b- Explain Innovation The introduction of something new draws directly on invention (the discovery and first proof of workability). - For each of the typical types of innovation: 1.Provide 2 examples of each: Product innovation (Mac cosmetics and M&M) and Process innovation (Kroger and Whataburger) 2.Explain how these two types of innovation were used to drive up profits: They use a technological advance like for example Walmart uses advance scanners to sell and process their products, and also, they use new and better goods and services or new and better ways of producing or distributing them. -Explain how our ability to do process and product innovation might be impacted by a slow growth / no growth economy, and what we can do about the problem. The fact to create process innovation can slow growth of economy by the fact that for car assembly line for example because of advance technology they won’t need much people anymore so the unemployment rate will increase. c- Explain Diffusion -Define it: The spread of an innovation through imitation or copying. -Explain how it works: New and existing companies emulate successful innovations of others. -Give 3 examples involving firms that have lead diffusion of some innovation and why these represent good examples of diffusion: Lewis Jeans, Ford. d- You work for Mr. Elon Musk and he has asked you to explain how his company can determine its optimal level of R&D spending. -Please explain the general concept of optimal level of R & D spending. A firm decides of his optimal level of R&D Depends on its perception of MB and MC of R&D, Present sacrifice versus future expected gain. -Explain the marginal cost and marginal benefit components. The marginal cost (MC) is an interest way cost of funds. We can obtain fund for R&D by banks loans where the rate of interest is the cost of using the funds and by personal saving where the MC is the foregone. The marginal benefit (MB) is an expected rate of returned. The firm’s MB from R&D is an expected profit (or return) from the last (marginal) dollar spent on R&D. -2- Second strategy is very important to meet the current competition at hand. The effective second strategy a.The effective second strategy is that reducing the price and also giving it in a fresh new packing with a reduced quantity. This is one of the second strategies to counter the competition. It is a known fact that when you reduce the quantity with a new packing it is mandatory to reduce the price of the product in the same ratio that it is being reduced. Hence you can make some profit out of it. b.With the reduced quantity and the new packing, is not mandatory to reduce the price in the same ratio as that of the quantity. Hence the consumer what want to consume less amount of the energy drink will go for the small packaging. This will definitely boost the sales. Instead of people fully avoiding the product, people who want to consume less, will go for the lesser quantity packing. A consumer who just wants to have the taste of the energy drink or the refresher will go for the small packing. This is an example of the strategy working. One more point is that, volume of sales will also increase, attracting some bulk orders. c.Certain patents and copyrights obtained by coke will also safeguard you from the competition. The competitor cannot use the same formula for their product also, to match the taste that you are providing. Patents, copyrights and trademarks definitely save your economic profits from being eroded. e. Technological advance contributes enormously to economics efficiency. New and better products and processes enable the society to produce more goods at a less price, and produce a higher-valued mix of output.