Economic Industrial Organization

1.What are the two types of product innovation?

2.Why can innovation be hard to measure?

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3.What are two general methods for measuring innovation?

4. What is an issue with using patents as a measure of innovation?

5.Assume an innovation lowers a firm’s marginal cost, and its marginal cost is a horizontal line. Graphically show why perfectly competitive firms have more incentive to innovate than a monopoly?

6.What area in the above graph shows firms under-invest in innovation?

7.If we consider the issue of timing, do we necessarily find the result that firms under-invest in innovation from society’s perspective (i.e., the result in Arrow’s model and part6 )? Yes or no. Explain.

I have the answers in the power points, just need to manage the sentence

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