IO Tests PDF

Chapter 1 16 September ====================== 1\. Industrial Organization (I/O) is... - **...the supply side analysis of real-world markets.** -...the demand side analysis of hypothetical markets. -...the demand side analysis of real-world markets. -...the supply side analysis of hypothetical...

Chapter 1 16 September ====================== 1\. Industrial Organization (I/O) is... - **...the supply side analysis of real-world markets.** -...the demand side analysis of hypothetical markets. -...the demand side analysis of real-world markets. -...the supply side analysis of hypothetical markets. 2\. Most real-world markets are.................... competitive. - **imperfectly** - perfectly 3\. Which of the aspects below is NOT among those of market structures that I/O focuses on? - product differentiation - firm boundaries - conditions of entry - **buyer concentration** 4. 5\. Which expression refers to what factors? - exogenous: from outside - endogenous: from inside 6\. Which expression refers to what? - market: performance, structure - firms: conduct Chapter 2 23 September ====================== 1\. I/O assumes that firms' objective is profit maximization. **Igaz** 2\. In the perfectly competitive model, economies of scale are relatively........ and product is.......... - small; differentiated - large; homogenous - **small; homogenous** - large; differentiated 3\. Price-taking firms' demand function is - downward sloping - **horizontal** 4\. Consumers are maximizing their preferences. **Hamis** 5\. Competitive equilibrium of the firm is... -...in the intersection of its average cost curve and demand function -...in the intersection of its marginal cost and average cost curves - **...in the intersection of its marginal cost curve and demand function** 6\. Optimum consumption level is where -...willingness to pay for another unit exceeds price - **...consumer surplus is maximized** - both of the above statements are true - neither of the above statements are true 7\. A move is a potential Pareto improvement if... - **...the winners could compensate the losers and still be better off but they don't** -...it makes everybody better off but it is not taken -...it makes someone better of without making someone worse off 8\. A firm has market power if it finds it profitable to raise price above marginal cost. **Igaz** 9\. Please match the term with its description - supply side substitution: consumers can switch to other suppliers of the same product - demand side substitution: other products are available to consumers as substitutes 10\. Cross-price elasticity shows: - **the change in demand for one product as a function of change in price of another product** - the change in price for one product as a function of change in price of another product - the change in demand for one product as a function of change in demand of another product - the change in price for one product as a function of change in demand of another product 11\. Deadweight loss... - **...quantity is below the socially optimal level** -...willingness to pay is below marginal cost - both of the above statements are true - neither of the above statements is true 12\. In the longer run, a firm's elasticity of demand is likely to decrease. **Hamis** Chapter 3 30 September ====================== 1\. A firm is an organisation that transforms......................... to........................ - **resources; products** - **inputs; outputs** - **factors; production** - supply; demand 2\. Please match the cost types with their description - opportunity cost: the value of the factor in its next best alternative use - economic cost of durable inputs: depreciation and the lost rate of return on the capital - avoidable cost: the cost that would not occur without production - sunk expenditure: part of cost not recoverable by exiting production - variable cost: cost related to and a function of production - fixed cost: cost related to production but independent of its actual level 3\. Variable costs are avoidable. **Igaz** 4\. In the short run fixed costs are avoidable. **Hamis** 5\. Minimum efficient scale (MES) is the rate of output where economies of scale are minimized. **Hamis** 6\. Which statement is true? - Indivisibilities arise because of economies of scale. - **Economies of scale arise because of indivisibilities**. 7\. Economies of scope refers to saving costs by... -...expanding the vertical dimension of production in a plant - **...expanding the horizontal dimension of products produced in a plant** -...producing more of the same product in a plant. 8\. Please match the industrial organisation with its attribute. - firm: production determined by command - market: production determined by supply and demand 9\. Please match the economic organizations with their features. - spot market: interaction of supply and demand - long-term contract: terms of trade are determined - vertical integration: in-house production instead of buying 10\. A relationship-specific investment increases the cost of switching to another partner. **Igaz** 11\. Holdup can be a problem for: - the supplier - the buyer - neither - **both** 12\. Contracts are related to economic organisation as they define the terms and conditions of exchange. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - **Mindkét állítás igaz és összefüggés van köztük.** 13\. The residual control rights are at the owner of the asset. **Igaz** 14\. There are external limits to managerial opportunism. Please match the types with their features. - managerial labour markets: reduction in value as human capital - market for corporate control: reduction in the price of shares - bankruptcy constraints: squeezed room for managerial shirk - product market competition: unwanted attention to decisions and efforts, potential dismissal Chapter 4 7 October =================== 1\. Barriers to entry are necessary to sustain market power in the long run because firms with market power are price makers. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - **Mindkét állítás igaz és összefüggés van köztük.** 2\. Entry detterence is by default profitable. **Hamis** 3\. Which are the reasons for government-created barriers to entry? - efficiency - opportunity cost - **intellectual property protection** - **revenue for the government** - **natural monopoly** 4\. Superior factors of production yield \...\...\...\...\...\...\...\...\...\...\..... rents to their owners - **Ricardian** - Monopoly - both Ricardian and monopoly - neither Ricardian nor monopoly 5\. A superior product can make a firm dominant. **Igaz** 6\. In a market with a dominant firm and a competitive fringe the dominant firm is a price maker so its ability to set price is not restricted. - Egyik állítás sem igaz. - **Az első állítás igaz, a második hamis.** - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - Mindkét állítás igaz és összefüggés van köztük. 7\. According to the quiet life hypothesis, managerial slack depends on the level of competition in the market for corporate control. **Igaz** 8\. Which are the benefits of monopoly? - incentive to achieve cost efficiency - supply fully meeting demand - **possibility to exploit economies of scale** - **incentive to invest in R&D** 9\. Schumpeter argued that market power was............ in relation to firm's incentive to invest in R&D. - unpreferred - useful - **necessary** Chapter 5, 6 14 October 100% ============================ 1\. With price discrimination, the firm aims at increasing its profits because price discrimination leads to higher consumer surplus. - Egyik állítás sem igaz. - **Az első állítás igaz, a második hamis.** - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - Mindkét állítás igaz és összefüggés van köztük. 2\. Which of the statements is correct? - Price discrimination yields Pareto efficiency by exploiting more consumer surplus. - Price discrimination necessarily yields Pareto efficiency. - **Price discrimination yields Pareto efficiency by exploiting surplus from the deadweight loss.** - Price discrimination never yields Pareto efficiency. 3\. Two-part pricing means that there are two products for which prices are determined jointly by the firm. **Hamis** 4\. Price discrimination does not require market power. **Hamis** 5\. Please match the types of price discrimination with their features. - first-degree price discrimination: monopolist can extract the entire surplus from consumers - second-degree price discrimination: there are various combinations of product(s)/service(s) - third-degree price discrimination: consumers are grouped (market segmentation) 6\. Which of these is the description of tying? - selling product(s) in packages - setting different price levels for different time periods - **sale of a product linked to the purchase of another product** 7\. I/O interprets quality as: - the resource inputs into a product - **the vertical attributes of a product** - the satisfaction of consumers - the price level of a product 8\. In the case of search goods, the quality can only be determined after purchase. **Hamis** 9\. Quality discrimination means that consumers negatively discriminate certain products that are of low quality and reward products with high quality. **Hamis** 10\. In case of experience goods, there is an incentive to lower the quality of the product because experience goods tend to have a lower price. - Egyik állítás sem igaz. - **Az első állítás igaz, a második hamis.** - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - Mindkét állítás igaz és összefüggés van köztük 11\. Advertising can be a signal of quality because\... - **\...it implies that the firm can afford advertising.** - \...low quality products are not advertised. - both of the above statements are true - neither of the above statements is true 12\. Warranties can be a tool to signal high quality because providing warranties to a low quality product would be irrational on behalf of the producer. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - **Mindkét állítás igaz és összefüggés van köztük.** Chapter 7 21 October 100% ========================= 1\. Payoff interdependency exists when one player\'s payoff is paid by the other player. **Hamis** 2\. When each player moves once and players know the entire history of the game is a: - of incomplete information - dynamic game of complete information - static game of incomplete information - **static game of complete information** 3\. The assumption that all players know that all players are rational is named: - **common knowledge** - payoff interdependency - rationality 4\. Static games are paying less payoffs than dynamic games because in static games players move simultaneously. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - **Az első állítás hamis, a második igaz.** - Mindkét állítás igaz, de nincs összefüggés köztük. - Mindkét állítás igaz és összefüggés van köztük. 5\. A strategy is \...\...\...\...\...\...\...\...\...\...\...\...\...\... if it maximises a player\'s payoffs regardless of the strategies chosen by his rivals. - **strictly dominant** - strictly dominated - both of the above solutions are correct - neither of the above solutions is correct 6\. Solving a game by iterative elimination targets the strictly dominated strategy in each round of the iteration. **Igaz** Chapter 8 28 October ==================== 1\. The Cournot game is \...\...\...\...\...\...\...\...\..... and it is a competition over \...\...\...\...\...\...\...\...\...... - dynamic; prices - dynamic; quantities - **static; quantities** - static; prices 2\. The market power of the Cournot duopolists is limited by the market elasticity of demand therefore the Cournot equilibrium price will exceed the marginal cost of either firm. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - **Mindkét állítás igaz, de nincs összefüggés köztük.** - Mindkét állítás igaz és összefüggés van köztük. 3\. For the Herfindahl-Hirschmann index, the larger its value, the \...\...\...\...\...\...\...\...\...\.... the degree of market concentration. - smaller - **greater** 4\. In connection with the Cournot game, which of the statements are true and which are false? (Mark each statement accordingly.) - The equilibrium price will exceed the marginal cost of either firm. **Igaz** - Total output in the Cournot game is larger than monopoly output. **Igaz** - Cournot profits are larger than monopoly profits. **Hamis** - Firms with higher marginal cost will have greater market share. **Hamis** - Firms\' market power descreases with the number of firms growing. **Igaz** 5\. Compared to the Cournot equilibrium, profits can be increased by collusion. **Igaz** 6\. Free entry does not change the Cournot model in any way. **Hamis** 7\. Capacity constraints \...\...\...\...\..... change the Bertrand game. - cannot - **can** 8\. The Bertrand paradox says that there is a Nash equilibrium in the Bertrand game but it will not be reached. **Hamis** 9\. Please put the various price levels in the Bertrand game in the ascending order (from lowest to highest). 1. pB (Bertrand price) 2. pD (price with product differentiation) 3. pM (monopoly price) 10\. Please contrast the Cournot and Bertrand cases. Which one is appropriate in what situation? - Cournot game: firms are capacity constrained - Bertrand game: there are constant returns to scale Chapter 9, 10 4 November ======================== 1\. In dynamic games, players move more than once. **Igaz** 2\. Please match the element of the game tree with its description. - decision node: indicates a player\'s turn to move - branch: corresponds to the actions available to a player at that node - terminal node: represents the payoffs for the players 3\. What is the distinction between strategies and actions in dynamic games? - actions: the choices available to a player when it is his turn to move - strategies: the plan of decisions that the player will make at each node 4\. In game theory, strategies are built up of actions. **Igaz** 5\. In two-stage games, firm 1 moves in the first stage and firm 2 moves in the second stage. **Hamis** 6\. Which statement is true, and which is false? - There is no learning in finitely repeated games because such games end after a certain number of rounds. **Hamis** - There is learning in finitely repeated games because such games are repeated several times. **Igaz** - There is learning in infinitely repeated games because such games never end. **Igaz** 7\. Static games better simulate markets than dynamic games. **Hamis** 8\. Match the concept with its description. - collusion: firm conduct intended to coordinate the actions of firms - cartel: a group of firms that have agreed to coordinate pricing and output to increase profits - tacit collusion: firms coordinate their behaviour simply by observing and anticipating their rivals' pricing behaviour 9\. In the profit space (visualised by the figure below), the following are shown: - the points inside the PPF line: inefficient profit levels for firms - the intersection of the two axes: perfect competition - point \"M\": monopoly profit equally distributed between the firms - point \"C\": the Nash equilibrium - area \"DCE\": room for cooperation - the PPF line: all combinations of maximum industry profits - beyond the PPF line: non feasible profits 10\. The profit possibility frontier (PPF) shows the maximum profits that can be earned by a firm in the available quantity-and-price combinations. **Hamis** 11\. Entry barriers influence the effect of firms' reduction of competition on their market power because without entry barriers the market power gained by the reduction of competition will be competed away by the entry of new firms. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - **Mindkét állítás igaz és összefüggés van köztük** 12\. Innovation \...\...\...\...\...\...\...\...\...\...\...\.... collusion. - **complicates** - facilitates 13\. In relation to the theory of oligopoly, Stigler proposed that\... - \...oligopoly should be approached from the oligopolists\' point of view - \...the question to examine should be how to police or enforce a collusive agreement - **both of the above statements are true** - neither of the above statements is true 14\. A firm\'s ability to cheat or the profitability of his cheating on a collusive agreement is enhanced when the firm is capacity constrained or has sharply rising marginal costs. **Hamis** 15\. Elastic firm demand makes sustaining collusion more difficult because it decreases the payoff from cheating. - Egyik állítás sem igaz. - **Az első állítás igaz, a második hamis.** - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - Mindkét állítás igaz és összefüggés van köztük. 16\. Match concept with description. - credible punishment: it is in the interest of the firm to actually carry it out - grim trigger strategy: played by a firm to sustain a collusive agreement - supergame: played infinite times without discounting - facilitating practice: firm conduct increasing the likelihood of collusion Chapter 11, 12 11 November ========================== 1\. Which are the two basic types of product differentiation? - Products are horizontally differentiated if...: consumers have heterogeneous preferences, regarding the most preferred mix of different attributes - Products are vertically differentiated if...: consumers unanimously agree on which product or brand is preferred 2\. Monopolist competition presupposes... -...symmetric preferences of consumers **Igaz** -...a quasi-monopolist incumbent **Hamis** -...barriers to entry **Hamis** -...a very large set of possible differentiated products **Igaz** 3\. In the case of symmetric preferences... - Products are close substitutes to products in other groups **Hamis** - A set of differentiated products represent close substitutes of each other **Igaz** - The elasticity of substitution is constant **Igaz** - The elasticity of substitution is equal **Igaz** - The cross-elasticities of demand across the groups are significant **Hamis** 4. In the graphical presentation of monopolistically competitive equilibrium: - DD curve: demand curve for all other firms - dd curve: demand curve for the shown firm - perfect competition equilibrium: where AC(q)=MC(q) - monopolistic competition equilibrium: where AC is tangent to dd 5\. In monopolistic competition, each firm is a monopoly supplier of its own product because there is a competition products in one product market space. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - **Mindkét állítás igaz és összefüggés van köztük.** 6\. In monopolistic competition, firm demand curve is shallower than market demand curve... - **...because of firm's monopolistic power over own product** -...because of product differentiation in the market -...because monopolistic competition is below the socially optimal 7\. In address models: - consumers preferences are defined along various product attributes **Igaz** - mismatch costs occur if consumer preferences are different from the available products **Igaz** - there is interdependency among the various dimensions **Hamis** - quantity and price are determined **Hamis** - products are determined along various product attributes **Igaz** 8\. Which statement is true? - Address models are representations of consumer preferences but not of product differentiation. - Address models are representations of product differentiation but not of consumer preferences. - **Address models are representations of both consumer preferences and product differentiation.** - Address models are representations neither of consumer preferences nor of product differentiation. 9\. Localised competition in the product space means that all of the sellers know all of their competitors' products. **Hamis** 10\. In a sequential entry game, the equilibrium is characterised by... - **...maximum product differentiation.** -...minimum product differentiation. -...no product differentiation. 11\. There are three types of strategic behaviour - brand proliferation: locating multiple brands in a product space so that no locations are available for profitable entry - brand specification: deterring entry by strategically choosing the location of the product in the product space - brand pre-emption: introducing brands before an entrant, thereby eliminating the possibility of profitable entry 12\. There are two basic approaches to industrial organization. Please group their features. Structure-Conduct-Performance (SCP): - there is stable, causal relationship between market structure, firm behaviour and outcome - relatively static approach - structural variables are exogenous - findings are relevant across industries New Empirical Industrial Organisation (NEIO): - marginal cost is unobservable - firm behaviour is estimated based on theory - investigation is industry-specific - relatively long run is analysed Chapter 13, 14 18 November ========================== 1\. Please match the term with its feature. - threat: a penalty imposed on rival upon a certain action - promise: a reward for rival upon a certain action - commitment: a credible threat or promise - credible move: it is in the interest of the player - strategic move: it affects rival's future position 2\. Please decide whether the statements are true or not. - A commitment is credible. **Igaz** - A promise is credible. **Hamis** - A promise is a penalty imposed on a rival. **Hamis** - A threat is credible. **Hamis** - A threat is a penalty imposed on a rival. **Igaz** 3\. Non-price competition in oligopoly is inherently strategic. **Igaz** 4\. Match the element of the strategic move with its attribute - sequential moves: dynamic game - communication: game of perfect information - affects incentives: game-theoretic situation - rational expectations: presumption of game theory 5\. The direct effect of a strategic move refers to the effect on... -...the firm taking the move - **...the rivals' payoffs** -...the rivals' future expectations 6\. When the behaviour of your rival is changed because your strategic move changes his expectations regarding your behaviour on the future that is the............ effect of.......... behaviour. - **indirect; your** - direct; your rival's - indirect; your rival's - direct; your 7\. Which component is representing which effect of strategic investment (k~1~) on behalf of firm 1? A képen asztal látható Automatikusan generált leírás 8\. Strategic choices occur prior to tactical choices. **Igaz** 9\. Strategic choices have effect - in the long run - in the short run - **both of the above statements are true** - neither of the above statements is true 10\. What types of decisions are made in the respective decision horizons? - short run: quantity, price - long run: product characteristics, production capacity, marketing - very long run: research and development 11\. The Stackelberg game is a duopoly game in prices. **Hamis** 12\. The difference between the Cournot and Stackelberg games is that - the Stackelberg game is a game over prices while the Cournot game is a game over quantities - **the Stackelberg game is a two-stage game while the Cournot game is a static game** - both of the above statements are true - neither of the above statements is true 13\. Put the outputs in the ascending order (from smallest to largest). 1. Cournot 2. Stackelberg 3. competitive 14\. In an entry game, the incumbent sets the price... - **...lower than the monopoly price** -...above the monopoly price -...at the monopoly price 15\. In the first stage of the two-stage game of strategic competition, the incumbent can invest in... -...advertising **Igaz** -...R&D **Igaz** -...price **Hamis** -...capacity **Igaz** 16\. Which of the statements apply to the Dixit game? - Competition postentry is over quantities. **Igaz** - There is no Nash equilibrium. **Hamis** - It is a static game. **Hamis** - Incumbent's choice is that of capacity. **Igaz** 17\. In a blockaded monopoly, the monopolist does not have to worry about entry as it will not happen. **Igaz** 18\. There are no real profits in contestable markets so there is no potential for entry in such markets - **Egyik állítás sem igaz.** - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - Mindkét állítás igaz és összefüggés van köztük. 19\. A sustainable industry configuration is also feasible. **Igaz** Chapter 15, 16 25 November 100% =============================== 1\. Entry deterrence is a.............. while entry barrier is a................. - structural characteristic; firm behaviour - **firm behaviour; structural characteristic** 2\. Investment in the first stage of two-stage games is considered strategic because such games represent asymmetric competition. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - **Mindkét állítás igaz, de nincs összefüggés köztük.** - Mindkét állítás igaz és összefüggés van köztük. 3\. There are two reasons for an incumbent to engage in cost-reducing investment -- which one has what effect? - reduction of production costs: direct effect - enjoy a larger market share and larger profits: strategic effect 4\. Investment in the first stage of strategic competition shifts........... best response function...\......... - **firm 1's; to the right** - firm 1's; to the left - firm 2's; to the right - firm 2's; to the left 5\. Match the attributes to the cases. - best response functions upward sloping: strategic complements, game in prices - best response functions downward sloping: strategic substitutes, game in quantities 6\. When increase in demand for one product increases demand of the other product, we call them - **strategic complements** - strategic substitutes 7\. The strategic effect in price competition is a......... that............. firm 2's profits. - overinvestment; increases - overinvestment; decreases - underinvestment; decreases - **underinvestment, increases** 8\. For consumers, competition in strategic complements results in a(n).............. in price that implies.............. consumer surplus. - decrease; lower - increase; higher - **increase; lower** - decrease; higher 9\. In the case of learning by doing, total average cost is decreasing by cumulative production growing so there are economies of scale in the market. - Egyik állítás sem igaz. - **Az első állítás igaz, a második hamis.** - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - Mindkét állítás igaz és összefüggés van köztük. 10\. Learning in Industrial Organization refers to: - **producing more** - investing in capacity 11\. The learning curve is: - linear and upward sloping - linear and downward sloping - **hyperbolic and downward sloping** - hyperbolic and upward sloping 12\. Limited access to a certain technology can yield competitive advantage therefore learning can deter entry. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - **Mindkét állítás igaz, de nincs összefüggés köztük.** - Mindkét állítás igaz és összefüggés van köztük. 13\. The installed base of customers have already paid the switching costs. **Hamis** Chapter 17, 18 2 December 100% ============================== 1\. Economics presupposes constant consumer preferences therefore advertising aims at changing these preferences. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - **Mindkét állítás igaz, de nincs összefüggés köztük.** - Mindkét állítás igaz és összefüggés van köztük. 2\. There are two types of advertising according to IO. - Persuasive: aims at influencing the consumer (normative) - Informative: aims at giving a picture (positive) 3\. Why is it difficult to address advertising through economics? - Because economics supposes perfectly informed consumers. - **Because economics takes consumer's preferences as a given.** - Both of the above statements are true - Neither of the above statements is true 4\. Please put the steps of the game of advertising as an endogenous sunk cost in the correct order 1. decision on entering or staying out is mage 2. advertisement investment levels are chosen 3. quantitates are chosen 5\. In the case of predatory advertising, a firm's advertising increases the demand for rival firm's product. **Hamis** 6\. Match the types of strategic advertising with their attributes. - Cooperative advertising: increases the demand on rival firms' products, strategic complements, results in advertising undersupplied - Predatory advertising: decreases the demand on rival firm's products, strategic substitutes, result in advertising excessive. 7\. Advertising is on behalf of an incumbent typically results in a........ strategy in an entry deterrence game - top dog - **lean-and-hungry look** - fat cat - puppy dog 8\. Advertising can never result in an equilibrium in lower prices because advertising costs outwirh production and distribution cost saving. - **Egyik állítás sem igaz.** - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - Mindkét állítás igaz és összefüggés van köztük. 9\. Which scholar said what? - Robert Solow: application of new knowledge in the development of new product and processes is a source of growth. Growth is caused by technological progress more than by the accumulation of capital or labour Advances in knowledges increases productivity - Joseph Schumpeter: perfect competition is not an optimal market structure in respect of R&D, periodically new products and processes uproot old markets and create new ones, monopoly creates the strongest incentive to innovate 10\. In a duopoly strategic R&D is similar to the Prisoner's Dilemma because both firms undertake cost-reducing R&D which eventually makes both of the worse off. - Egyik állítás sem igaz. - Az első állítás igaz, a második hamis. - Az első állítás hamis, a második igaz. - Mindkét állítás igaz, de nincs összefüggés köztük. - **Mindkét állítás igaz és összefüggés van köztük.** 11\. Strategic R&D result in......... competition - puppy dog - fat cat - **top dog** - lean-and-hungry look 12\. An innovation is considered drastic if it substantially changes market structure (market actors and market shares). **Hamis** 13\. The replacement effect of innovation makes a monopolist counter-incentivized in innovation. **Igaz** 14\. Match the concept with its description. - Efficiency effect of innovation: the monopolist will have a greater incentive to innovate in order to secure future monopoly rents. - Replacement effect of innovation: Earlier monopoly rent is lost due to innovation, which makes monopolist counter-incentivised in innovation 15\. Why is it wiser to approach R&D in stochastic models than in deterministic models? - **Because R&D never yields its results with 100% probability (p) but only with 0\