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By the end of this section, you will be able to:
  • Identify the positive externalities of new technology.
  • Explain the difference between private benefits and social benefits and give examples of each.
  • Calculate and analyze rates of return

Market competition can provide an incentive for discovering new technology because a firm    can earn higher profits by finding a way to produce products more cheaply or to create products with characteristics consumers want. As Gregory Lee, CEO of Samsung said, “Relentless pursuit of new innovation is the key principle of our business and enables consumers to discover a world of possibilities with technology.” An innovative firm knows that it will usually have a temporary edge over its competitors and thus an ability to earn above-normal profits before competitors can catch up.

In certain cases, however, competition can discourage new technology , especially when other firms can quickly copy a new idea. Consider a pharmaceutical firm deciding to develop a new drug. On average, it can cost $800 million and take more than a decade to discover a new drug, perform the necessary safety tests, and bring the drug to market. If the research and development (R&D) effort fails—and every R&D project has some chance of failure—then the firm will suffer losses and could even be driven out of business. If the project succeeds, then the firm’s competitors may figure out ways of adapting and copying the underlying idea, but without having to pay the costs themselves. As a result, the innovative company will bear the much higher costs of the R&D and will enjoy at best only a small, temporary advantage over the competition.

Many inventors over the years have discovered that their inventions brought them less profit than they might have reasonably expected.

  • Eli Whitney (1765–1825) invented the cotton gin, but then southern cotton planters built their own seed-separating devices with a few minor changes in Whitney’s design. When Whitney sued, he found that the courts in southern states would not uphold his patent rights.
  • Thomas Edison (1847–1931) still holds the record for most patents granted to an individual. His first invention was an automatic vote counter, and despite the social benefits, he could not find a government that wanted to buy it.
  • Gordon Gould came up with the idea behind the laser in 1957. He put off applying for a patent and, by the time he did apply, other scientists had laser inventions of their own. A lengthy legal battle resulted, in which Gould spent $100,000 on lawyers, before he eventually received a patent for the laser in 1977. Compared to the enormous social benefits of the laser, Gould received relatively little financial reward.
  • In 1936, Turing delivered a paper titled, "On Computable Numbers, with an Application to the Entscheidungsproblem," in which he presented the notion of a universal machine (later called the “Universal Turing Machine," and then the "Turing machine") capable of computing anything that is computable. The central concept of the modern computer was based on Turing’s paper.

Questions & Answers

if three forces F1.f2 .f3 act at a point on a Cartesian plane in the daigram .....so if the question says write down the x and y components ..... I really don't understand
Syamthanda Reply
hey , can you please explain oxidation reaction & redox ?
Boitumelo Reply
hey , can you please explain oxidation reaction and redox ?
Boitumelo
for grade 12 or grade 11?
Sibulele
the value of V1 and V2
Tumelo Reply
advantages of electrons in a circuit
Rethabile Reply
we're do you find electromagnetism past papers
Ntombifuthi
what a normal force
Tholulwazi Reply
it is the force or component of the force that the surface exert on an object incontact with it and which acts perpendicular to the surface
Sihle
what is physics?
Petrus Reply
what is the half reaction of Potassium and chlorine
Anna Reply
how to calculate coefficient of static friction
Lisa Reply
how to calculate static friction
Lisa
How to calculate a current
Tumelo
how to calculate the magnitude of horizontal component of the applied force
Mogano
How to calculate force
Monambi
a structure of a thermocouple used to measure inner temperature
Anna Reply
a fixed gas of a mass is held at standard pressure temperature of 15 degrees Celsius .Calculate the temperature of the gas in Celsius if the pressure is changed to 2×10 to the power 4
Amahle Reply
How is energy being used in bonding?
Raymond Reply
what is acceleration
Syamthanda Reply
a rate of change in velocity of an object whith respect to time
Khuthadzo
how can we find the moment of torque of a circular object
Kidist
Acceleration is a rate of change in velocity.
Justice
t =r×f
Khuthadzo
how to calculate tension by substitution
Precious Reply
hi
Shongi
hi
Leago
use fnet method. how many obects are being calculated ?
Khuthadzo
khuthadzo hii
Hulisani
how to calculate acceleration and tension force
Lungile Reply
you use Fnet equals ma , newtoms second law formula
Masego
please help me with vectors in two dimensions
Mulaudzi Reply
how to calculate normal force
Mulaudzi
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Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
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