Microeconomics - Week 8 - Chap 11 - Kevin Hart Chapter 11 Questions 6 10 Microeconomics Professor Swick 6 Some economists argue that private firms will

Microeconomics - Week 8 - Chap 11 - Kevin Hart Chapter 11...

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Kevin Hart Chapter 11 – Questions 6, 10 Microeconomics Professor Swick 6. Some economists argue that private firms will not undertake the efficient amount of basic scientific research. a. Explain why this might be so. In your answer, classify basic research in one of the categories shown in Figure 1. Basic research is a public good because it is not excludable (no one can be prevented from knowing it) and it is not rival (one person knowing does not stop another person from knowing it). Because it is a public good, the free rider problem will take away the incentive for firms to conduct such research. They cannot gain enough private benefit from the research to offset the costs of conducting it. b. What sort of policy has the United States adopted in response to this problem? The government subsidizes basic research to push the supply curve in line with the social- benefit curve (increase market price to increase supply).
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