Research into new technologies provides a
A)negative externality, and too few resources are devoted to research as a result.
B)negative externality, and too many resources are devoted to research as a result.
C)positive externality, and too few resources are devoted to research as a result.
D)positive externality, and too many resources are devoted to research as a result.

Question

Quizplus · Accepted Answer

Research into new technologies provides positive externalities, as the benefits spill over to society as a whole beyond the individual or firm conducting the research. However, too few resources may be devoted to research as private firms may not capture all of the benefits (e.g. increased productivity, improved quality of life) that result from their research, leading to underinvestment. This is known as the "market failure" in research and development, which may require government intervention.

Research into New Technologies Provides a