Suppose scientific research generates external benefits. Without government intervention, the market for scientific research would
A) produce some research, but less than the efficient amount.
B) produce more than the efficient amount.
C) produce the efficient amount.
D) produce zero research.
E) either produce more than or less than the efficient amount depending on whether the external benefit is on the production or consumption of the research.

Question

Quizplus · Accepted Answer

In the absence of government intervention, the market for scientific research would only take into account the private benefits to the researcher or the firm conducting the research. It will not take into account the external benefits that scientific research generate, such as advancements in knowledge, innovation, and improved economic and social outcomes. Therefore, the market will produce less research than the socially desirable level, resulting in a market failure.

Suppose Scientific Research Generates External Benefits