Myra is a firm producing premium handbags for women. These bags are manufactured and patented in the country of Ceria. Manufacturers in the country of Argonia create counterfeit Myra bags and sell them in the local markets of Argonia. These bags are sold at almost similar prices to the original in other countries. Which of the following is likely to happen?

Question

Quizplus · Accepted Answer

Inadequate protections for intellectual property reduce the incentive for innovation. Because innovation is a central engine of economic growth and rising living standards, the argument has been that a multilateral agreement is needed to protect intellectual property. Without such an agreement it is feared that producers in a country might market imitations of patented innovations pioneered in a different country. This can affect international trade in two ways. First, it reduces the export opportunities in Argonia for the original innovator in Ceria. Second, to the extent that the Argonian producer is able to export its pirated imitation to additional countries, it also reduces the export opportunities in those countries for the Cerian inventor.

Myra Is a Firm Producing Premium Handbags for Women