Economist Michael Kremer offered a unique solution to the problem of deadweight loss created by monopolies that have control of an innovation. What solution did he propose that would leave the drive to innovate uncompromised?
A) The government should buy out the innovation created by the monopoly.
B) The government should sell a patent to the monopoly that creates the innovative technology.
C) The government should buy out the rights of the patent from the monopoly.
D) The government should place a price control on the monopoly's product.

Question

Quizplus · Accepted Answer

Kremer proposed that the government should buy out the rights of the patent from the monopoly. This would allow the innovation to become public domain and prevent the monopoly from having complete control over it. It would also allow for other firms to produce the innovation, promoting competition and reducing deadweight loss. This solution does not compromise the drive to innovate as the inventor still maintains the rights to their invention, but the government simply buys out those rights to prevent the monopoly from exploiting the innovation.

Economist Michael Kremer Offered a Unique Solution to the Problem