The Definition of a Public Good Economists

The Definition of a Public Good Economists have a strict definition of a public good, and it does not necessarily include all goods financed through Chapter 13 | Positive Externalities and Public Goods 309   http://openstaxcollege.org/l/REtaxcredit   taxes. To understand the defining characteristics of a public good, first consider an ordinary private good, like a… Continue reading The Definition of a Public Good Economists

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Cooperative Research State discussion

Cooperative Research State and federal governments support research in a variety of ways. For example, United for Medical Research, a coalition of groups that seek funding for the National Institutes of Health, (which is supported by federal grants), states: “NIH-supported research added $69 billion to our GDP and supported seven million jobs in 2011 alone.”… Continue reading Cooperative Research State discussion

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Government Spending on Research

Policy #1: Government Spending on Research and Development If the private sector does not have sufficient incentive to carry out research and development, one possibility is for the government to fund such work directly. Government spending can provide direct financial support for research and development (R&D) conducted at colleges and universities, nonprofit research entities, and… Continue reading Government Spending on Research

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Equilibrium Employment for Firms

Equilibrium Employment for Firms in a Competitive Labor Market In a perfectly competitive labor market, firms can hire all the labor they want at the going market wage. Therefore, they hire workers up to the point L1 where the going market wage equals the value of the marginal product of labor. Derived Demand Economists describe… Continue reading Equilibrium Employment for Firms

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Tax Breaks for Research and Development

Tax Breaks for Research and Development A complementary approach to supporting R&D that does not involve the government’s close scrutiny of specific projects is to give firms a reduction in taxes depending on how much research and development they do. The federal government refers to this policy as the research and experimentation (R&E) tax credit.… Continue reading Tax Breaks for Research and Development

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Equilibrium Level of Employment

Equilibrium Level of Employment for Firms with Market Power For firms with market power in their output market, they choose the number of workers, L2, where the going market wage equals the firm’s marginal revenue product. Note that since marginal revenue is less than price, the demand for labor for a firm which has market… Continue reading Equilibrium Level of Employment

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