Question

QUESTION 5 Research and development has positive externalities because it leads to profit for the developers the new ideas have "spillover" effects for those not involved in the initial R&D because the new ideas can be used to develop other new ideas and applications by others it positively affects those involved in the R&D it is a pure free-market outcome QUESTION 6 The Federal Trade Commission (FTC) reviews all mergers and acquisitions valued at $90 million or more in order to preserve full information prevent a market from having too little competition make sure the merger will be profitable review the implications for tax revenue QUESTION 7 The National Institutes of Health (NIH) and the National Science Foundation (NSF) provide government support for basic research. The rationale for the government action is that basic research generates spillovers to 3rd parties and creates additional benefits tor society that are not properly valued in the market without government support there would be a sub-optimal amount of basic research both of the above none of the above

Answer 1

1. Research and Development has positive externalities because new ideas have spillover affects for those not involved in the initial R&D. The new ideas can be used for development of other new ideas and application by others. As a result society as a whole is benefited.

2 The FTC reviews all mergers and acquisitions valued at $90 million or more to prevent a market having too little competition. This is because it will harm consumers as less competition means high prices for consumers and may be creation of monopoly in the long run.

3. The NIH and NSF provide government support for basic research because without government support the research will be off sub optimal level.