The Merits of a Patent System Is

question 11

Multiple Choice

The merits of a patent system is

• A) the patent system gives firms strong incentives to take the risk of substantial research and development costs.
• B) the patent system may precipitate the development of new products.
• C) granting monopoly power through a patent may be beneficial from society's perspective.
• D) all of the above.

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Definitions:

Constant Returns to Scale

A situation in which increasing the scale of production inputs results in a proportional increase in the output.

Long-run Average Total Cost

The cost per unit of output incurred when all factors of production, including physical capital, are variable.

Minimum Efficient Scale

The smallest level of production at which a firm can achieve the lowest long-run average total costs.

Constant Returns to Scale

A situation in which the proportionate increase in inputs leads to an equal proportionate increase in outputs, meaning costs and outputs scale equally as production expands.