Question 1

Government has a role in subsidizing research and development when

Accepted Answer

Subsidizing research and development is beneficial when there are large spillovers, which means that the knowledge and benefits generated from the research and development spill over to society as a whole and not just the specific industry or firm conducting the research. Since spillovers cannot be fully captured by private firms, government intervention can help incentivize firms to conduct research and development that may not otherwise be profitable. This can lead to increased knowledge, innovation, and economic growth.

Question 2

Because of spillovers, the social benefit of research and development

Accepted Answer

Spillovers refer to positive externalities that occur when the benefits of R&D spill over to individuals or firms not directly involved in the research. These spillovers increase the social benefit of R&D beyond the private benefit, which is the benefit received by the firm conducting the research. Therefore, the social benefit is greater than the private benefit.

Question 3

What is meant by a nonrivalrous good?

Accepted Answer

A nonrivalrous good is a good that can be consumed by multiple people without diminishing another's consumption. Examples include digital goods like software or streaming services, as well as public goods like parks or highways.

Question 4

______ grants temporary monopoly rights, typically for 20 years from its filing date.

Accepted Answer

A patent grants the holder exclusive rights to make, use, and sell their invention for a limited period of time, typically 20 years from the filing date. This gives them a temporary monopoly on the invention, allowing them to prevent others from making, using, or selling it without their permission.

Question 5

Patents allow a firm to enjoy a monopoly, thus increasing the incentive to

Accepted Answer

Patents provide firms with exclusive rights to manufacture and sell their inventions for a certain period of time, which creates a barrier to entry for potential competitors. This increases the incentive for firms to invest in research and development to come up with new products and technologies that they can exclusively own and profit from. Therefore, the best choice is D, research and develop new products.

Question 6

Why do some economists think that economic growth due to ideas will be faster in the future?

Accepted Answer

All the given options contribute to the idea of economic growth due to ideas being faster in the future. With an increasing number of scientists and researchers, there will be more innovations and ideas being generated, leading to economic growth. Globalization allows firms to expand their market size, which can lead to increased revenue and profits, contributing to economic growth. Countries like China and India are seeing significant economic growth and are investing in science and technology, leading to more ideas being generated and larger markets for firms. Therefore, all the options stated are correct and contribute to the idea of economic growth being faster in the future.

Question 7

If two or more people can use a good at the same time without preventing others from using it, the good is said to be a(n)

Accepted Answer

A nonrivalrous good is a type of good that can be used by multiple people at the same time without diminishing its availability or quality for others. Examples of nonrivalrous goods include public parks, radio broadcasts, and digital music files.

Question 8

Which of the following should lead to an increased rate of economic growth due to increased development of ideas?

Accepted Answer

Increased population leads to more people with diverse ideas and skills, which can lead to increased innovation and economic growth. Increased consumer wealth and larger markets create more demand for goods and services, which can incentivize businesses to innovate and expand. Political stability and honest governments can encourage investment and entrepreneurship, which can lead to the development of new ideas and industries. Therefore, all three factors can contribute to increased development of ideas and higher rates of economic growth.

Question 9

R&D spillovers

Accepted Answer

R&D spillovers are nonrivalrous, which means that the benefits of the research and development can be enjoyed by others without reducing the benefits to the original inventor. This is because ideas and knowledge can be easily transmitted and shared, leading to positive externalities for society. However, this also means that the inventor may not fully capture the value of their innovation, which could result in underinvestment in R&D.

Question 10

Which of the following is NOT a governmental program that would encourage technological advancement?

Accepted Answer

Requiring banks to offer no-money-down incentives for loans to buy homes is not a governmental program that would encourage technological advancement. The other options - creation and enforcement of patent and copyright laws, providing loans for higher education in basic sciences, and providing tax credits for research and development - are all programs that can encourage and support technological advancement.

Question 11

Which of the following is NOT a reason that world GDP per capita could grow even faster than its current rate?

Accepted Answer

Decreased government spending can slow down economic growth, as it may lead to reduced investment in infrastructure, education, and other areas that contribute to GDP growth.

Question 12

Considering the incentives for the private market to conduct research and development, we expect that the amount of research and development conducted by the private sector would be ____ the efficient level because of the ____ property of new knowledge.

Accepted Answer

Private companies have an incentive to conduct research and development in order to gain a competitive advantage and earn profits. However, the property of new knowledge is nonrivalrous, which means that one company's use of the knowledge does not diminish its availability to others. This creates a free-rider problem, where companies can benefit from the research and development of others without contributing themselves. As a result, the private market is likely to conduct less research and development than the efficient level.

Question 13

The larger the spillovers, the stronger the argument for

Accepted Answer

The answer of The larger the spillovers, the stronger the...

Question 14

The concept of a spillover can be defined as I. the use of non-rivalrous ideas. II. the fact that even with patents, ideas tend to spillover and benefit other firms and consumers. III. an excess supply of good ideas.

Accepted Answer

Spillover refers to the fact that even with patents, ideas tend to spread and benefit other firms and consumers, which is represented by II. The first option is not accurate as it refers to non-rivalrous ideas, but this is not what defines a spillover. The third option may be related, but it talks about an excess supply of good ideas, which is not a necessary condition for a spillover to occur.

Question 15

The optimal private investment in R&D would likely be __________ the optimal social investment.

Accepted Answer

Private investors may only consider the potential profits from their R&D investment, whereas social investors would also consider the broader benefits to society such as advances in healthcare or clean energy. Therefore, the optimal private investment in R&D would likely be less than the optimal social investment.

Question 16

You create a video to audition for film school. It ends up being viewed by over 500,000 people. What are the additional people enjoying?

Accepted Answer

The additional people who are enjoying the video are experiencing the effect of a spillover good, as they are not the intended audience for the video but are still benefiting from it. The video was created for a specific purpose (auditioning for film school), but it ended up being viewed by a much larger audience, which is an example of a positive spillover effect.

Question 17

Pharmaceutical companies tend to concentrate on drugs for common diseases because

Accepted Answer

Pharmaceutical companies want to make the most profit, and drugs for common diseases have a larger potential market, making them more profitable.

Question 18

A patent I. provides temporary monopoly power to the company that receives it. II. usually does not expire. III. is issued by the government.

Accepted Answer

I is correct as a patent provides temporary monopoly power to the company that receives it, usually for 20 years from the filing date of the patent application. II is incorrect as patents do expire after their allotted time period. III is correct as patents are indeed issued by the government.

Question 19

Technological advances are generally expected to have ______ spillovers.

Accepted Answer

Technological advances are expected to have positive spillovers as they can improve productivity, increase innovation, and lead to the creation of new products and industries. While there may be some negative impacts such as job displacement, the overall impact is typically positive.

Question 20

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.

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.

Quiz 26: Gdp and the Measurement of Progress