Economic Industrial Organization

1.What are the two types of product innovation?

2.Why can innovation be hard to measure?

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