Because investors often cannot be fully compensated for the benefits their ideas provide to others, they may produce too little technology. Thus, there is a potential role for government in providing funds for research and development, both in industry and in universities.

Question

Quizplus · Accepted Answer

This statement is true. It is an example of market failure where there is under-provision of technology due to inability of investors to fully capture the benefits of their ideas. Government intervention can help in funding research and development.

Because Investors Often Cannot Be Fully Compensated for the Benefits