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Because Investors Often Cannot Be Fully Compensated for the Benefits

question 120

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Because investors often cannot be fully compensated for the benefits their ideas provide to others, they may produce too little technology. Thus, there is a potential role for government in providing funds for research and development, both in industry and in universities.


Definitions:

Invest

The act of allocating resources, usually money, in the expectation of generating an income or profit.

Discount Rate

A percentage used to calculate the present value of future cash flows or investments.

Present Value

The current worth of a future sum of money or stream of cash flows given a specified rate of return, discounting future amounts to their present values.

Annual Rate

Typically refers to the interest rate for a whole year, often applied in terms of loans, investments, or savings.

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