Why does the government intervene in the market for research, especially medical research?
What will be an ideal response?
The usual justification for government involvement in research in general, and in medical research in particular, is that research and innovation create positive externalities,but much of the social value of these innovations does not accrue to the innovating firm. This means that although research has a high social value, private firms do not have an incentive to invest in costly research and development. The government steps in to subsidize research so that private firms continue to invest in research and innovation.
A-head: ECONOMICS OF HEALTH
Concept: Government intervention in health markets
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According to the theory of liquidity preference, if the interest rate rises
a. people want to hold more money. This response is shown by moving to the right along the money demand curve. b. people want to hold more money. This response is shown by shifting the money demand curve right. c. people want to hold less money. This response is shown by moving to the left along the money demand curve. d. people want to hold less money. This response is shown by shifting the money demand curve left.
Under a floating exchange-rate regime with a high degree of capital mobility, international crowding out of expansionary fiscal policy occurs when
A. foreign interest rates increase. B. the country's currency appreciates. C. the foreign money supply increases. D. domestic interest rates increase.