Invention, Innovation, Public Good, and Positive Externality

Problem Set 1 
Name FB 415 Introduction to Economics of InnovationInstructor Date
1. How would you distinguish between an invention and an innovation?
An invention is the creation of a new product, process, idea, or service without necessarily having profitability. While an invention or discovery improves the knowledge stock, it does not always result in a full-fledged novel product or process being available in the market (Greenhalgh & Rogers, 2009). On the other hand, innovation is turning an existing new product, service, or process into something more practical by improving, adding, or making significant contributions. Innovation helps to make the new products and processes more commercially valuable. 
2. Characteristics of a public good? Is all-new knowledge a public good?
A public good is a good that available and consumed by everyone without exclusion, for those who pay and those who do not pay for the good. A public good is nonrival in consumption and non-excludable. Non-rivalry implies that more consumers are added this will not limit the other citizens’ access to goods and enjoyment. One cannot exclude an individual or group of people from consuming public goods. These goods are also consumed together, giving utility to more than one user at the same time. Most new knowledge is a public good as it is non-rivalrous consumption by an individual or group of people does not diminish it and non-excludable. However, sometimes new knowledge is only available to a specific group, and there are limits on who can leverage the knowledge.
3. What is a positive externality? How does this differ from a public good?
A positive externality refers to all kinds of beneficial repercussions for society, generated by production or consumption activities, which are not included in the costs. Public goods are associated with positive externalities such as public health financing, but positive externalities reflect the positive spillovers, while public goods are...