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Patents: Why Does the Government Grant Monopoly Power?

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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.

See Also This Related BrainMass Solution

Science, Patents, and the Government

1. When answering keep in mind; Externalities, Public Goods, Imperfect Information, and Social Choice.

"Government involvement in general scientific research has been justified on the grounds that advances in knowledge are public goods - once produced, information can be shared at virtually no cost. A new production technology in an industry could be make available to all firms, reducing costs of production, driving down price. and benefiting the public. The patent system, however, allows private producers of "new knowledge" to exclude others from enjoying the benefits of that knowledge. Inventors would have little incentive to produce new knowledge if there were no possibility of profiting from their inventions. If one company holds exclusive rights to an advanced production process, it produces at lower cost but can use the exclusion to acquire monopoly power and hold price up."

In 150-200 words, please help answer the questions below.

a. On balance, is the patent system a good or a bad thing? Explain in detail.

b. Is government involvement in scientific research a good idea? Discuss.

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