1.Marvelous Medical Research is a firm that is considering investing in R&D around potential cures for cancer. Show the following on one graph:

a.The firm's private demand for financial capital to undertake this R&D investment

b.The social demand for financial capital to undertake this R&D investment

c.Discuss how the private and social demand differ and what happens as a result of this difference if there is only private investment.

d.Discuss how different policies might ensure the socially optimal level of investment.

2.Hand sanitizer reduces the spread of germs and improves patient outcomes in medical settings. However, the benefits of hand sanitizer accrue to not just the doctors and nurses who use it, but also the patients. Consider a medical practice's private demand for hand sanitizer and the social demand for hand sanitizer.

a.Show, in a supply and demand diagram, the socially optimal outcome in the market for hand sanitizer and the private market outcome.

b.Discuss what happens in the market for hand sanitizer.

c.What can the government do to ensure the optimal level of hand sanitizing?

1.Bike paths are a public good that provides health benefits.

a.Explain how the free rider problem would occur for bike paths.

b.What would happen to the number of bike paths if they were privately provided?

c.Why is there a role for government in providing bike paths?

d.How can the government provide and pay for bike paths?