Bakra Was the Holder of a Patent on a Wireless

question 123

Essay

Bakra was the holder of a patent on a wireless modem.During 2010,he sold all substantial rights in the patent for $345,000 in cash and a 3% royalty on the purchaser's first $10,200,000 of sales each year related to the product in which the patent is incorporated.Bakra had not reduced the patent to practice.He had a $56,000 basis for the patent.During 2010,he received $10,000 in royalties.What is the nature and amount of Bakra's gain?

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Definitions:

Utility Maximization

An economic principle where individuals or institutions make choices to achieve the highest satisfaction or benefit from their resources.

Equilibrium

A state in which market supply and demand balance each other, and as a result, prices become stable.

MU/P Ratio

The ratio of marginal utility (MU) to price (P), used to determine the optimal consumption point where consumer satisfaction per unit of cost is maximized.

Marginal Utility

The heightened benefit received from using one more unit of a good or service.