D) have determined that an investment program to… Show mor

D) have determined that an investment program to… Show more Experts in agricultural research and development (R&D) have determined that an investment program to develop an alternative pesticide technology that would achieve the productivity gains without causing the negative externalities would cost $50 million dollars and result in social benefits of $10 million dollars annually in perpetuity. The $50 million R&D investment program would be performed by a consortium of private firms. However, because of spillovers, the private benefits appropriated by the consortium would be only $3 million annually in perpetuity. The private and social required rates of return (hurdle rates) are the same and equal 10%. a. Is the R&D investment program socially beneficial? Explain. Will the private sector undertake the R&D in the absence of public support? Explain. b. Explain the design of a public policy that would subsidize the private performance of the R&D (to ensure that the research is done by the private sector) yet would minimize the public funds used. • Show less

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