Some economists argue that private firms will not undertake the efficient amount of basic scientific research.

a Explain why this is so. In your answer, classify basic research into one of the categories shown in Figure 11.1.

b What sort of policy has Australia adopted in response to this problem?

c It is often argued that this policy increases the technological capability of Australian producers relative to that of foreign firms. Is this argument consistent with your classification of basic research in part (a)? (Hint: Can excludability apply to some potential beneficiaries of a public good and not others?)