If technological progress involves positive externalities, then private sector spending on research and development may be:

Question

Quizplus · Accepted Answer

If there are positive externalities from technological progress, then the social benefits exceed the private benefits, which means that private sector spending on research and development may be too low. Private firms may not take into account the full social benefits of their R&D activities, leading to an underinvestment in this area. Therefore, public sector spending on research and development may be necessary to increase overall levels of R&D and encourage technological progress. Additionally, "too high" and "wasted" are not appropriate choices as they do not align with the premise of positive externalities. The statement "less than public sector spending on research and development" is not necessarily true, as there is no clear comparison between private and public sector spending given the information provided.

If Technological Progress Involves Positive Externalities, Then Private Sector Spending