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Chapter 13: Q. 18 (page 316)

Is it inevitable that government must become

involved in supporting investments in new technology?

Short Answer

Expert verified

It isn't inevitable that authorities ought to grow to be concerned in assisting investments in new era. private firms will pick out to put money into new era and create new thoughts and products to obtain the non-public blessings and opposition among companies will in addition incentivize this technique. but, this degree of funding can be less than socially finest.

Step by step solution

01

Concept Introduction

It's miles in no way a foregone conclusion that the government wishes to become concerned in the free market so one can support investments in new generation. now and again they may be going to be very small gains from doing that. And whilst the video games are small sufficient, what takes place is that the value of government involvement does no longer certainly make sense.

02

Explanation

In light of the small profits so government has cost in terms of, it wishes taxation to run. It has fee within the in so far because it's an imperfectly mechanism. So when the profits air small, it typically would not make feel for the government to emerge as involved. however there also are different mechanisms, which include social pressures, that can be at work. And on occasion those social pressures are amazing sufficient that they may be a valuable incentive to motive people to take into account no longer simply personal advantages but also public blessings. And that could very frequently result in an growth in investments in new era as much as the socially ultimate stage.

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Most popular questions from this chapter

Becky and Sarah are sisters who share a room. Their room can easily get messy, and their parents are always telling them to tidy it. Here are the costs and benefits to both Becky and Sarah, of taking the time to clean their room: If both Becky and Sarah clean, they each spends two hours and get a clean room. If Becky decides not to clean and Sarah does all the cleaning, then Sarah spends 10 hours cleaning (Becky spends 0) but Sarah is exhausted. The same would occur for Becky if Sarah decided not to clean—Becky spends 10 hours and becomes exhausted. If both girls decide not to clean, they both have a dirty room.

a. What is the best outcome for Becky and Sarah? What is the worst outcome? (It would help you to construct a prisoner’s dilemma table.)

b. Unfortunately, we know that the optimal outcome will most likely not happen, and that the sisters probably will choose the worst one instead. Explain what it is about Becky’s and Sarah’s reasoning that will lead them both to choose the worst outcome.

In what ways do company investments in research and development create positive externalities?

Suppose that Sony's R&D investment in digital devices has increased profits by 20%. Is this a private or social benefit?

Are the following goods non-rival in consumption?

a. slice of pizza

b. laptop computer

c. public radio

d. ice cream cone

Assume that the marginal private costs of a firm producing fuel-efficient cars is greater than the marginal social costs. Assume that the marginal private benefits of a firm producing fuel-efficient cars is the same as the marginal social benefits. Discuss one way that the government can try to increase production and sales of fuel efficient cars to the socially desirable amount. Hint: the government is trying to affect production through costs, not benefits.
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