A firm is concerned about the possibility of patent infringement and has hired an attorney to review patents. If the attorney is reviewing 100 patents and the marginal cost of reviewing the 100th patent is $50 and the expected marginal benefit of reviewing the 100th patent is $50, which of the following is true?

Question

Quizplus · Accepted Answer

When the marginal cost of reviewing a patent equals the expected marginal benefit of reviewing it, the firm is allocating its resources efficiently to minimize the total cost of infringement. This is because they are reviewing patents up to the point where the cost of reviewing one more patent equals the benefit derived from it, indicating an optimal level of review activity to minimize potential infringement costs.

A Firm Is Concerned About the Possibility of Patent Infringement