QUESTION 71 (6 marks)
A research grant supports a new battery-storage process. The technology can later be used by other domestic firms without paying the original researcher. Explain a rationale for public support and evaluate one risk in selecting the grant recipient.
Practice marking scheme
Answer
Knowledge spillovers may cause underinvestment; grants risk selecting weak projects or displacing private funding.
Working
Benefits received by other firms are not fully captured in the innovator’s private return, so commercially chosen research may be below the socially useful level. Public support can encourage innovation, productivity and sustainable growth. Government must assess additionality and technical feasibility; subsidising research that would happen anyway has an opportunity cost. Milestones and competitive assessment can reduce, but not eliminate, these risks.
Marking criteria
- Explains the spillover and private/social benefit distinction. [2 marks]
- Links research to a macroeconomic capacity objective. [2 marks]
- Evaluates a selection/additionality risk and a safeguard. [2 marks]
Practice question aligned to the current QCAA syllabus; review the worked solution and marking criteria.
View the QCAA syllabusCompare your working with the guide above.