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Chapter 12 notes - -Expected not guaranteed-Adjustments may...

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Chapter 12- Technology, R&D, and Efficiency -3 Step Process of Technological Advance Invention: The discovery of a product or process through the use of imagination, ingenious thinking, and experimentation and the first proof that it will work. Innovation: The first successful commercial introduction of a new product, the first use of a new method, or the creation of a new form of business enterprise. Diffusion: The spread of the innovation through imitation or copying. -Research and Development (R&D) Activities undertaken to bring about technological progress -Development (72%) -Applied (22%) -Basic Research (6%) Driving force beyond R&D efforts -Profits -Personal Satisfaction -Reputation -A Firm’s Optimal Amount of R&D MB versus MC -Cost of Funds -Bank Loans -Bonds -Retained Earnings -Venture Capital -Personal Savings Expected Profit (or Return) -Example -Interest-rate cost-of-funds curve -Expected-ROR curve -Optimal amount of R&D
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Unformatted text preview: -Expected, not guaranteed-Adjustments may be necessary-Increased Profit via Innovation • Increased Revenue-Consumers will buy a new product only if it increases the total utility they obtain from their limited incomes.-Importance of Price-Unsuccessful New Products-Product Improvements • Reduced Cost-Downward shift of the firm’s ATC curve-Imitation versus Innovation • A firm’s rivals may be able to imitate its new product or process, greatly reducing the originator’s profit from its R&D efforts.-Fast-second strategy • Benefits of Being First-Patents -Copyrights and Trademarks-Brand-Name Recognition-Trade Secrets and Learning by Doing-Time Lags-Profitable Buyouts-Role of Market Structure • Pure Competition • M-C • Oligopoly • Pure Monopoly • Inverted-U Theory • Empirical Evidence-Technological Advance and Efficiency • Productive Efficiency • Allocative Efficiency • Creative Destruction...
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