Answer to Question #70402 in Macroeconomics for Jobelle Del Rosario

Question

How can governments play a role in promoting knowledge based industries in which fixed costs are high and marginal costs are close to zero?

Answer 1

In order to promote knowledge-based industries government can give concession, or monopoly power for some given years. It is also possible to invest in fixed cost, and let the private sector to invest in variable cost for some given years.