The Argument That Concentration of Market Power Enhances Research and Development

question 34

Multiple Choice

The argument that concentration of market power enhances research and development efforts may be weak because

• A)Monopolies cannot afford basic research.
• B)A monopoly may have no clear incentive to pursue new research and development.
• C)No one has attempted to gather any empirical evidence.
• D)No existing monopoly has a research and development program.

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Definitions:

Price Floor

A government-imposed minimum price that can be charged for a good or service, designed to protect producers by ensuring that market prices do not fall below a certain level.

Surplus

The situation where the quantity of a good or service supplied exceeds the quantity demanded at the current price.

Shortage

A situation where the demand for a product exceeds its supply at a specific price.

Quota Rent

The economic rent a producer earns from the difference between the market price of a good and its supply price due to a quota limit.