U.S. antitrust laws are designed to prohibit monopolization and encourage competition. Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?
What will be an ideal response?
Patents are designed to encourage creative activity and promote the development of new technologies. Firms can spend years on research and development in the search for new and better production processes and consumer products. Research and development is costly - many potential new ideas are ultimately not technically feasible or never become commercially successful. If research and development results in a successful product, competing firms can easily copy the product and sell it without incurring the research costs of the firm that developed the product, if patent protection is not granted. Most people would object to this form of "free riding" on equity grounds; but patents also encourage firms to conduct research that leads to social benefits: new technologies result in a higher standard of living for all and a more efficient allocation of society's scarce resources.
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When we look at exchange rates btwn two countries, what is the relationship between the exchange rate expressed in units of the domestic currency and the exchange rate expressed in units of the foreign currency?
a. They are both equal to one. b. They cancel each other out. c. One is always the reciprocal of the other. d. They can never coexist.
Assuming that pizza is a normal good, if students' income at your college increases substantially, there would be:
A) a reduction in the demand for pizza. B) an increase in the quantity of pizza demanded. C) no change in the demand for pizza. D) an increase in the demand for pizza.