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Patents: Why Does the Government Grant Monopoly Power?

Why does the government create monopoly power via its patent system, when elsewhere it spends millions trying to prevent the emergence of or regulate monopoly power?

(Answer provided in approximately 100 words, with an example.)

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The government's objective is to create an incentive for firms to develop products that require a large capital investment. A typical example is prescription drugs. Pharmaceutical companies can invest up to ten years ...

Solution Summary

This solution explains why the government grants monopoly power via its patent system. The answer is given in paragraph form and provides a real-world example.