Final answer:
Knowledge generates external benefits and is encouraged by intellectual property rights. It is considered a public good with positive externalities when companies invest in R&D, leading to societal advancements. Intellectual property rights protect these innovations and provide incentives for ongoing innovation.
Step-by-step explanation:
Complete the following sentence. Knowledge...d. A and D are correct. This is because knowledge generates external benefits when companies invest in research and development (R&D), leading to innovations that have wider societal benefits beyond the private gains to the firm. Additionally, knowledge is encouraged by intellectual property rights which protect such innovations and provide innovators with the incentive to continue their R&D efforts. Knowledge therefore becomes a public good, with positive externalities that enhance the productivity and well-being of society at large.
For example, research in new technologies, such as those developed by NASA, not only benefits the investing firm but also creates advancements that benefit the broader society. These spillovers from new technology—positive externalities—contribute to the social benefit of an invention. Competition creates pressure to innovate, and protecting these innovations through intellectual property rights ensures that inventors can receive a fair share of the social benefits, which fosters further invention and innovation.
Governments encourage this process by providing policies that guarantee intellectual property rights, assist with R&D costs, and promote cooperative research ventures between universities and companies.