In this blog you will find the correct answer of the Coursera quiz Competitive Strategy Coursera week 5 Quiz mixsaver always try to bring the best blogs and best coupon codes

1. Which of the following statements is/are true?


  • Product innovations and process innovations never go hand in hand.
  • The focus of process innovations is to decrease the costs of production.
  • An incremental innovation helps the innovating firm to act as a monopolist in the market.
  • Process innovations make the consumer willing to pay more for the product.

2. What is true about the different stages of the research and development process?


  • The achievements of basic research are difficult to protect.
  • Basic research requires more budget than applied research.
  • For product development it is also important to identify the relevant consumer groups.
  • Basic research generates specific knowledge which is related to a concrete application.
  • Applied research is about applying scientific knowledge to solve a specific problem.
  • Applied research is all about developing new products.

3. Firms often face the following problem(s) when engaging in basic research:


  • They get engaged in a patent race.
  • They end up in a prisoner’s dilemma like situation.
  • They get locked into a certain type of technology.

4. FieldLab and MedInvest are leading pharmaceutical companies. They both think about starting a research campaign to examine the basic structure and properties of cancer cells which costs about 8mn USD. The outcome of the research campaigns does not directly relate to a product and is difficult to patent. But it helps the whole industry to better understand cancer cells and subsequently develop more sophisticated drugs. These can be sold at higher prices and generate additional revenues of 7mn USD for each company (if one company does research) or 9mn USD for each company (if both companies do research).

What will happen?


  • The firms cannot decide about who should do the research.
  • Only MedInvest starts the research campaign and this hurts FieldLab.
  • Both companies decide against starting a campaign even though this would be better for them.
  • The companies do more research than optimal.


PRACTICE QUIZ  Incentives to Innovate


1. According to the replacement effect…


  • …a monopolist has generally low incentives to innovate because of the high level of pre-innovation profits.
  • …the outcome of innovation is rather uncertain.
  • …a monopolist has high incentives to innovate if another company is about to enter the market.
  • …a monopolist has higher incentives to innovate than firms in a competitive market.
  • …a monopolist has generally low incentives to innovate because this would make the market more attractive for possible entrants.

2. Given a monopoly situation, the replacement effect dominates the efficiency effect if…


  • … the probability that another firm enters the market is high.
  • … the monopolist has already been in the market for a long time.
  • …there are many different customers in the market.
  • … the probability that another firm enters the market is low.

3. Imagine you are the CEO of Forklift 2000, a well-established manufacturer of forklifts. Every year, there is demand for 1.000 forklifts. Usually, the customers go for the cheaper product. You and your competitor Lift-It Corporation have production costs of 10.000 Euros per forklift and the same production capacity.

At the beginning of this year, the head of an automation engineering company approaches you. He offers to equip you exclusively with an innovative production technology that lowers your production costs by 2.500 Euros per forklift.

What would you be willing to spend for the innovation?


  • 2.499.000 €
  • 5.000.000 €
  • 3.000.000 €
  • 4.399.000 €


PRACTICE QUIZ  Innovation & Competition


1. What is true about sleeping patents?


  • With sleeping patents innovators try to prevent others from producing a similar product.
  • Sleeping patents help a monopolist to maintain its monopoly position.
  • Sleeping patents are closely related to existing products of the innovating firm.
  • Sleeping patens increase competition in the market.

2. Imagine there are two companies producing spray deodorants. A recent survey revealed that consumers prefer eco-friendly over conventional products. Both firms now think about setting up a research facility (total costs of 15mio Euro) to explore eco-friendly spray technologies. The probability that a research facility manages to develop such an innovative technology is 50%. If both firms sell eco-friendly deodorants, they make additional profits of 30mio Euro each. If only one firm offers such deodorants, this firm makes additional profits of 100mio Euro.

What will happen?

  • Just one firm sets up a research facility.
  • Both companies do not set up a research facility.
  • Both firms set up a research facility.
  • Honor Code Agreement


Why Worry About Research and Development


1. The first generation of Apple’s iPad is an example of…


  • …a product innovation.
  • …an incremental innovation.
  • …a process innovation.
  • …a drastic innovation.

2. Imagine that L’Oréal and Garnier are active in the market for skin care products.

Each firm could engage in research and development (R&D) to improve the formula of their anti-wrinkle cream.

The costs for such a R&D project are estimated to be 10mn Euros.

With probability of 25% such a R&D project comes up with a marketable improvement of the cream formula.

If only one firm (either Garnier or L’Oréal) comes up with an improved cream formula, this firm will make additional gross profits of 32mn Euros.

If both firms (Garnier and L’Oréal) come up with an improved cream formula, each firm will make additional gross profits of 16mn Euros.

Assume that L’Oréal and Garnier are both rational players that take their competitors into account. What will be the outcome of this situation?


  • Only Garnier engages in R&D
  • Neither Garnier nor L’Oréal engage in R&D
  • Garnier and L’Oréal engage in R&D
  • Only L’Oréal engages in R&D

3. Which of the following actor(s) has(have) the highest incentives to innovate?


  • Companies in a competitive market
  • Monopolist without threat of an entrant
  • Monopolist with threat of an entrant
  • Potential entrant
  • It is not clear

4. Sleeping patents…


  • …have been criticised by competition authorities in the past.
  • …are used by companies to prevent competitors from inventing a close rival to the own product.
  • …are accused of hindering technological progress.
  • …are used by companies to maintain a dominant position in their product markets.
  • …are always good for consumers.
  • …are often commercialised immediately after patent granting.

5. Which of the following statements are true:


  • Directly after implementing a drastic innovation, the innovator can behave like a monopolist in the market.
  • Product innovations are generally more valuable than process innovations.
  • In general, process innovations increase the consumers’ willingness to pay for a product.
  • When undertaking a R&D project, firms often face the threat that a competitor comes up with the innovation first and absorbs the whole market potential of the innovation.
  • When it comes to decide about R&D processes, firms often face a trade-off between the chances of achieving innovations with promising returns on the one side, and the risks of losing R&D investments on the other side.
  • Regarding the innovation incentives of a monopolist, the replacement effect always dominates the efficiency effect.

6. Imagine you are the CEO of Nespresso, the monopolist for coffee capsules.

There are 1000 consumers:

– 600 are willing to pay 4 Euros per coffee capsule

– 400 are willing to pay 3 Euros per coffee capsule

Your production costs are 2 Euros per coffee capsule.

A consultancy firm has developed a new design concept for your coffee capsules. Their marketing department estimates that all of your consumers would be willing to pay 1 Euro more for coffee capsules in the new design. Your production costs are not affected.

The consultancy offers you to implement the new design for 500 Euros. Do you accept the deal?


  • Yes
  • No

7. Imagine you are the CEO of International Paper, one of ten international producers of printing paper. Every year, 1,000,000 kg of printing paper are sold worldwide.

You and your competitors are in perfect price competition. All companies have the same production costs of 500 Euros per 1,000 kg of printing paper and produce printing paper of the same kind and quality. The paper is sold in units of 1,000 kg.

You receive the exclusive offer to buy a license that enables you to use an innovative production process that lowers your production costs by 50%. Your strategic marketing department tells you that everybody will buy your printing paper if you set a price per unit that is 1 Euro lower than your competitors. From your operations department, you know that your company has the capacity to produce 1,000,000 kg of printing paper every year.

You are in the bargaining process for the yearly license fee. What is the value of the innovation (per year) to your company?

(Please type in just a number like 12000 for 12,000 Euros)


  • 139000
  • 189000
  • 249000
  • 289000

8. Imagine a monopolist has the opportunity to implement a process innovation that would reduce its production costs. The process innovation causes some costs.

The probability that another company wants to enter the market is high.

Which of the mentioned effects would you expect to dominate?


  • Replacement Effect
  • Efficiency Effect

9. You are a tire producer in a market with five competitors. All tires are of the same kind and quality. There are 100 consumers who are willing to pay 300 Euros for a set of tires. Currently, all firms in the market have production costs of 200 Euros and set a price of 200 Euros per set of tires.

You are now offered the exclusive rights to implement a process innovation that cuts your production costs by 50%. In order to maximize your profits, you could then set a price that is 1 Euro below your competitors.

What is the value of this innovation to you?


  • 0 Euros
  • 2,400 Euros
  • 8,000 Euros
  • 9,900 Euros
  • 15,000 Euros
  • 19,900 Euro

10. Basic Research…


  • …is mainly done by companies and other private organizations
  • …can be protected easily by patents or copyrights.
  • …is subject to knowledge spillovers.
  • …refers to the application of scientific knowledge to the solution of a specific problem.


Important link: