Question 1.) What is meant by technological advance, as broadly defined? How does technological advance enter into the definition of the very long run? Which of the following are examples of technological advance, and which are not: an improved production process; entry of a firm into a profitable purely competitive industry; the imitation of a new production process by another firm; an increase in a firm's advertising expenditures?
Question 2.) Contrast the older and the modern views if technological advance as they relate to the economy. What is the role of entrepreneurs and other innovators in technological advance? How does research by universities and government affect innovators and technological advance? Why do you think some university researchers are becoming more like entrepreneurs and less like "pure scientists"?
Question 3.) Learning how to use software takes time. So once customers have learned to use a particular software package, it is easier to sell them software upgrades than to convince them to switch to new software. What implications does this have for expected rates of return on R&D spending for software firms developing upgrades versus firms developing imitative products?
Question 4.) Why might a firm making a large economic profit from its existing product employ a fast-second strategy in relationship to new or improved products? What risks does it run in pursing this strategy? What incentive does a firm have to engage in R&D when rivals can imitate its new product?
Question 5.) Evaluate: "Society does not need laws outlawing monopolization and monopoly. Inevitably, monopoly causes its own self-destruction, since its high profit is the lure for other firms or entrepreneurs to develop substitute products."