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Exam 13: Positive Externalities and Public Goods

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Question 21

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When technology is advancing so quickly, even a patent from, say, two years ago may be _______ , because _______.

A) somewhat outdated; few firms are relying on the technology
B) completely outdated; no firm is relying on that technology any longer
C) irrelevant; inventors are only receiving a slice of the social value.
D) irrelevant; not every idea can remain under patent protection forever.

E) All of the above
F) None of the above

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Question 22

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The federal government funds _______ of the nation's basic research, much of which _______.

A) more than half; carried out by private firms
B) less than half; conducted in the labs of private firms
C) about half; conducted at colleges and universities
D) more than half; conducted a government run facilities

E) None of the above
F) A) and D)

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Question 23

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A highly innovative firm operating in a competitive market will usually have

Paddy and Mick are the only two inhabitants of a small island off the coast of Ireland. They burn coal to keep their houses warm at night. However, this coal burning is harming the air quality on their island. Both Paddy and Mick could install air filters on their chimneys. These filters cost 50 each. Each filter provides a social benefit of 80, but those benefits are divided equally among Paddy and Mick. If both Paddy and Mick install the filters

Once it's patent application has been accepted, a firm is able to earn _______ on its product, which _______.

If some of the products developed by I'mASoftwareCo. must face market competition that can very quickly produce either an identical product or a close substitute for it, then

In the context of both positive externalities and public goods, briefly explain why private firms or individuals might fail to make expenditures or investments that would produce broad social benefits.

Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology?

It is commonly understood that every invention

Which of the following would be classified as a positive externality?

Ideally, a patent should cover a long enough period of time for the inventor to _______ , but that period should not be so long that it allows the inventor to _______.

Raven Farms raises a substantial number of bees and uses the honey to produce its own skin healing cream. Raven Farms is situated next to the Oakcreek Apple Orchard. The bees from Raven Farms pollinate Oakcreek's apple trees. In this instance, Raven Farms

CleanAir Motors Inc. wants to build electric cars with no emissions. However, electric motors require innovative battery technology for adequate energy storage to meet basic daily commuting needs. The company has several possibilities for alternative battery technology, along with estimates of how these approaches would affect their costs of producing the cars and their sales of the cars. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain private rate of return. Every investment would have an additional 2% social return: that is, an investment that pays at least a 6% return to the car company will pay at least an 8% return for society as a whole. If the opportunity cost of financial capital for CleanAir Motors Inc. is 10%, CleanAir Motors Inc. will Invest _______ in R&D if it receives both the private and social benefits of this investment.

Why did Gordon Gould have to endure a lengthy legal battle in order to receive a patent for his innovative laser idea concocted in 1957?

Government has a variety of policies that allow inventors to _______, such as the granting patents and _______.

When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being

When a firm invests in new technology, the _______ that the firm receives are _______.

Tom, Mary and Jill have apartments in the same building. A security system for their building costs $750. Tom is willing to pay $100 for the security system, Mary is willing to pay $300 and Jill is willing to pay $300. They have a meeting to vote on whether to pay $250 each for the security system. At least two of them must vote for the system to be installed before the vote is passed. The efficient outcome is to have the security system installed. After the meeting the security system will _______, which illustrates _______.

YummyCandiesCo. has developed a new candy bar that contains a full recommended daily allowance of vitamins and minerals. This invention will provide considerable spillover benefits to society. The table below shows the demand for the candy bars, the supply of candy bars if the company receives only the private benefits, and the supply of candy bars if the firm also receives the full social benefits. If the new candy bar were sold based only on private benefits, the equilibrium price and quantity would be

On average, it can cost _______ and take _______ to discover a new drug, perform the necessary safety tests, and bring the drug to market.