Lesson 1317 of 1524
Positive Externalities and Public Goods
New technology often has positive externalities; that is, there are often spillovers from the invention of new technology that benefit firms other than the innovator.
Practice this chapterNew technology often has positive externalities; that is, there are often spillovers from the invention of new technology that benefit firms other than the innovator. If inventors could receive a greater share of the broader social benefits for their work, they would have a greater incentive to seek out new inventions
Competition creates pressure to innovate. However, if one can easily copy new inventions, then the original inventor loses the incentive to invest further in research and development.
public good — good that is nonexcludable and non-rival, and thus is difficult for market producers to sell to individual consumers. positive externalities — beneficial spillovers to a third party or parties. social benefits — the sum of private benefits and external benefits. nonexcludable — when it is costly or impossible to exclude someone from using the good, and thus hard to charge for it.
Worked example
What does “public good” mean in Positive Externalities and Public Goods?
- 1Use the wording this chapter gives for public good.
- 2The book says: good that is nonexcludable and non-rival, and thus is difficult for market producers to sell to individual consumers.
- 3Do not use the meaning of positive externalities. That term means beneficial spillovers to a third party or parties.
Result: good that is nonexcludable and non-rival, and thus is difficult for market producers to sell to individual consumers
Why. That is the meaning this chapter gives for public good.
Do not swap public good and positive externalities. public good means good that is nonexcludable and non-rival, and thus is difficult for market producers to sell to individual consumers. positive externalities means beneficial spillovers to a third party or parties.
Practice margin
This chapter
A fresh set from this chapter only. Choose 10 or 20. Multiple choice and fill-in, with no repeat inside the set.