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Big Drug Company
A pharmaceutical company planning its R&D budget for the next year.
R&D Budget
The financial plan for research and development projects.
Rate of Return
The estimated payoff from a research and development project.
DPrivate
The downward-sloping demand curve representing the firm's demand for financial capital based on private benefits.
DSocial
The demand curve that includes spillover benefits to society, lying above DPrivate.
Spillover Benefits
Positive externalities that benefit other firms and households from a company's innovations.
Socially Optimal Level
The ideal amount of borrowing and investment for society, which is higher than the firm's private investment.
Interest Rate
The cost of borrowing money, which affects the firm's investment decisions.
Equilibrium Investment
The amount the firm is willing to invest based on its private demand for financial capital, which is $30 million at an 8% interest rate.
Total Benefits
The combined private and social benefits that a firm could potentially enjoy from its investments.
Positive Externalities
The additional benefits that society gains from a firm's innovations beyond the firm's private profits.
Competing Products
New products developed by other firms as a result of innovations from the original firm.
Demand Curve Shift
The change in the firm's demand for financial capital if it could monopolize social benefits, moving from DPrivate to DSocial.
Investment Willingness
The amount a firm is willing to invest based on the benefits it receives, which can fall between DPrivate and DSocial if it only captures a portion of social benefits.
Note 
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