Research and patents, pollution, and more
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1. Do you think the overall level of R&D would increase or decrease over the next 20 to 30 years if the lengths of new patents were extended from 20 years to, say "forever"? What if the duration was reduced from 20 years, to say, 3 years? Which situation would create more monopoly power in the market?
2. How does monopolistic competition differ from a) pure competition; b) pure monopoly; c) oligopoly? Explain fully what product differentiation entails.
3. Which following antipollution programs should be undertaken by the government? Explain your answer?
The following table shows the total costs and total benefits in billions for four different antipollution programs of increasing scope:
Program Total Cost (in Billions) Total Benefit (in Billions)
A------------------------ $3 --------------------------------------- $7
B------------------------- 7 --------------------------------------- 12
C--------------------------12 --------------------------------------- 16
D---------------------------18 --------------------------------------- 19
4. Distinguish between fixed and variable costs in the short run.
Classify the following as fixed or variable costs:
a. Advertising expenditures
b. Fuel
c. Raw material cost
d. Real estate taxes
5. What effect would a rule stating that university students must live in university dormitories have on the price elasticity of demand for dormitory space? What impact might this in turn have on room rates?
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Solution Summary
Monopolistic competition, price elasticity, and other discussion questions
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1. Do you think the overall level of R&D would increase or decrease over the next 20 to 30 years if the lengths of new patents were extended from 20 years to, say "forever"? What if the duration was reduced from 20 years, to say, 3 years? Which situation would create more monopoly power in the market?
The benefits from research and development are often in the form of patent protection. So, if patent protection increased, companies would be more likely to conduct more research. The costs of this research could be justified by the increased profits they would bring into the company. By the same token, a decline in the value of patent protection would cause a decline in research.
2. How does monopolistic competition differ from a) pure competition; b) pure monopoly; c) oligopoly? Explain fully what product differentiation entails.
Like pure competition, monopolistic competition involves many sellers. However, unlike perfect competition, each seller offers a slightly different version of the good. Therefore, the demand curve for these goods is more like that found in a monopoly. It is downward sloping, allowing the sellers some degree of ...
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