Firms are likely to underinvest in research and development, which slows the accumulation of knowledge capital, slowing economic growth, because A. knowledge capital is both rival and excludable, and no other firms can freely access the research and development of one particular firm. B. knowledge capital is both nonrival and nonexcludable; other firms can freely access the research and development of one particular firm. C. they can save that money and invest in capital accumulation, which is much better for growth.

Question

Mayra Cobb

Business

29 April, 13:36

Firms are likely to underinvest in research and development, which slows the accumulation of knowledge capital, slowing economic growth, because A. knowledge capital is both rival and excludable, and no other firms can freely access the research and development of one particular firm. B. knowledge capital is both nonrival and nonexcludable; other firms can freely access the research and development of one particular firm. C. they can save that money and invest in capital accumulation, which is much better for growth.

+1

Answers (1)

Know the Answer?

Ralph Blake · Answer 1

B. knowledge capital is both nonrival and nonexcludable; other firms can freely access the research and development of one particular firm.

Explanation:

Knowledge and capital are non-exclusive, firms may in the long run have access to research and development by other firms. In the short term, companies may be protected by patents. However, in the long run, patents expire and scientific knowledge becomes a common good, so everyone can have access. This acts as a disincentive for firms to invest in research and development. For economic growth the effect is very bad, since if all firms invested in knowledge, productivity would tend to increase significantly, increasing the GDP and wealth of nations.