Government has a role in subsidizing research and development when:
A) the beneficiaries are below the poverty line.
B) it can increase tax revenue.
C) it can more efficiently allocate resources.
D) the spillovers are large.

Question

Quizplus · Accepted Answer

When there are large spillover effects, meaning the benefits of the research and development extend beyond the individual or company conducting it, such as in medical or scientific breakthroughs, government intervention through subsidies can help to incentivize further innovation and progress that would otherwise not occur solely through private funding.

Government Has a Role in Subsidizing Research and Development When