Which of the Following Statements Is Correct

question 6

Multiple Choice

Which of the following statements is correct?

• A) Patents are one way of preventing monopoly.
• B) If pharmaceutical patents are enforced, the number of new drugs will decrease.
• C) Monopoly profit encourages firms to research and develop new drugs.
• D) Competition creates incentives for the invention of new drugs.

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Definitions:

Strong Form Efficiency

A theory that states all information, both public and private, is completely reflected in the prices of stocks, making it impossible to beat the market consistently through expert stock selection or market timing.

Semi-strong Form Efficiency

A theory in financial economics that implies all public information is already calculated into stock prices, meaning future price movements cannot be predicted using only public information.

Financial Markets

Financial markets are marketplaces where individuals and entities can trade securities, commodities, and other financial instruments in order to facilitate funding, investing, and risk management.

Advantage

The benefit or edge that a person, organization, or situation has over another.