riders so government policies are sometimes necessary to encourage research and

Riders so government policies are sometimes necessary

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riders"), so government policies are sometimes necessary to encourage research and development. For example, government policies that protect intellectual property rights with patents and copyrights guarantee firms exclusive rights to profits from new technologies for a period of time. This will encourage the accumulation of knowledge capital. In addition, subsidiesfor research and development through grants to researchers or tax benefits to firms that invest in research and development can also encourage the accumulation of knowledge capital. Finally, government subsidies for education will increase the number of workers who receive education, thereby reducing firms' costs of training and increasing the level of research and development firms will be willing to undertake.Diff: 2 Type: ES Page Ref: 187-188Topic: New Growth TheoryLearning Outcome: 7.2 Use the economic growth model to explain why growth rates differ across countriesAACSB: Analytic SkillsSpecial Feature: None46) Is knowledge capital subject to the law of diminishing returns? Explain.Answer: The law of diminishing returns states that successive increases in capital result in successively smaller and smaller increases in output. Knowledge capital may not be subject to the same law of diminishing returns that physical capital is. In fact, knowledge capital may experience increasingreturns because knowledge, once discovered, is available to everyone and is therefore more likely to generate new technologies and economic growth.Diff: 2 Type: ES Page Ref: 186-187Topic: New Growth TheoryLearning Outcome: 7.2 Use the economic growth model to explain why growth rates differ across countriesAACSB: Reflective ThinkingSpecial Feature: None77© 2015
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Chapter 7 Long-Run Economic Growth: Sources and Policies47) Describe the process of "creative destruction" using a specific example.1) Growth in Canada from 1870 to 1970 can be characterized as
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