University Researchers Create a Positive Externality Because What They Discover

question 372

Multiple Choice

University researchers create a positive externality because what they discover in their research labs can easily be learned by others who haven't contributed to the research costs. Suppose that the federal government gives grants to these researchers equal to the their per-unit production externality. What is the relationship between the equilibrium quantity of university research and the socially optimal quantity of university research produced?

• A)The equilibrium quantity is greater than the socially optimal quantity.
• B)They are equal.
• C)The equilibrium quantity is less than the socially optimal quantity.
• D)There is not enough information to answer the question.

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