REVIEW QUESTIONS
- In what ways do company investments in research and development create positive externalities?
- Will the demand for borrowing and investing in R&D be higher or lower if there are no external benefits?
- Why might private markets tend to provide too few incentives for the development of new technology?
- What can government do to encourage the development of new technology?
- What are the two key characteristics of public goods?
- Name two public goods and explain why they are public goods.
- What is the free rider problem?
- Explain why the federal government funds national defense.