How can a government reduce the private marginal cost of research and development for a firm? I. Offer the firm tax breaks for research and development expenses. II. Subsidize the firm's research and development process. III. Lower the social benefits of research and development.
A) I only
B) I and II only
C) III only
D) I, II, and III

Question

Quizplus · Accepted Answer

Offering tax breaks and subsidizing research and development expenses would directly reduce the private marginal cost for a firm. Lowering the social benefits of research and development, on the other hand, would decrease the overall incentive for firms to invest in research and development, potentially reducing innovation and progress in the long run.

How Can a Government Reduce the Private Marginal Cost of Research