Suppose scientific research generates external benefits.Without government intervention,the market for scientific research would
A) produce the efficient amount.
B) produce more than the efficient amount.
C) produce some research, but less than 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 produce some research, but less than the efficient amount. This is because the market would only take into consideration the private costs and benefits of research, neglecting the positive externalities (benefits to society) generated by scientific advancements. As a result, individuals and firms would not be willing to spend the full social cost of doing research, which would lead to underinvestment in research and a suboptimal outcome. Therefore, some level of government intervention, such as funding or subsidizing research, is needed to achieve the socially efficient level of scientific innovation.

Suppose Scientific Research Generates External Benefits