Patents are a form of monopoly that society allows because they _____.
(A) Set up a situation in which only a few manufacturers can control an industry.
(B) Give companies the right to decide who will be allowed to use their products.
(C) Encourage firms to research and develop new products that benefit society as a whole.
(D) Maintain an orderly way for companies to make a lot of money.
Ans: (C) Encourage firms to research and develop new products that benefit society as a whole.
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What does the demand curve tell us about the price that consumers are willing to pay?
What will be an ideal response?
There are only two firms in an industry with demand curves q1 = 30 - P and q2 = 30 - P. Both have no fixed costs and each has a marginal cost of 10 per unit produced. If they behave as profit-maximizing price takers, each produces 20 units and sells them at a price of 10 so that each firm makes zero economic profits. If they formed a cartel and split the production of the output evenly, the
profit-maximizing quantity produced by each firm is A) 5. B) 10. C) 15. D) 20.