rider problem through measures to assure that users of the public good pay for it. Such measures include

government actions, social pressures, and specific situations where markets have discovered a way to collect

payments.

Self-Check Questions

1. Do market demand curves reflect positive externalities? Why or why not?
322 13 • Self-Check Questions

2. Suppose that Sony's R&D investment in digital devices has increased profits by 20%. Is this a private or

social benefit?

3. The Gizmo Company is planning to develop new household gadgets. Table 13.4 shows the company’s

demand for financial capital for research and development of these gadgets, based on expected rates of

return from sales. Now, say that every investment would have an additional 5% social benefit—that is, an

investment that pays at least a 6% return to the Gizmo Company will pay at least an 11% return for society
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