Researchers produce the efficient quantity of research and development if they receive a voucher equal to the marginal ________ benefit,or a subsidy equal to the marginal ________ benefit. Patents and copyrights ________ result in an efficient amount of research and development.
A)social;social;cannot
B)social;social;can
C)external;external;cannot
D)external;external;can
E)external;social;can

Question

Quizplus · Accepted Answer

The efficient quantity of research and development is produced when researchers receive a subsidy equal to the marginal external benefit. Patents and copyrights cannot result in an efficient amount of research and development because they create a monopoly power and decrease the overall welfare by preventing other researchers from building upon the existing ideas. Therefore, options A, B, and E are incorrect as they involve social benefits. Option C is incorrect as it involves only external benefits, whereas a subsidy is needed to correct the market failure. Only option D correctly states that a subsidy equal to the marginal external benefit can result in an efficient amount of research and development.

Researchers Produce the Efficient Quantity of Research and Development If