Economist Michael Kremer Offered a Unique Solution to the Problem

question 99

Multiple Choice

Economist Michael Kremer offered a unique solution to the problem of deadweight loss created by monopolies that have control of an innovation. What solution did he propose that would leave the drive to innovate uncompromised?

• A) The government should buy out the innovation created by the monopoly.
• B) The government should sell a patent to the monopoly that creates the innovative technology.
• C) The government should buy out the rights of the patent from the monopoly.
• D) The government should place a price control on the monopoly's product.

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Definitions:

Interest Rates

The cost of borrowing money or the return on invested capital, expressed as a percentage of the principal, affecting economic activity by influencing spending and saving behaviors.

Unemployment

The situation in which individuals who are capable of working and are seeking work are unable to find employment.

Marginal Propensity

The ratio of change in an economic variable (such as consumption) that occurs with a change in another variable (such as income).

Investment Accelerator

The concept that suggests investment spending in an economy may increase due to growth in overall economic activity, boosting further growth.