Question 1

Which of the following can a firm use to defend a successful product's brand name?

Accepted Answer

The best way to defend a successful product's brand name is to apply for a trademark, which gives the firm exclusive ownership of the name and the ability to legal action against any other firm that uses it without permission. Patents only protect inventions, advertising alone cannot protect the brand name, and copyright only protects original works of authorship.

Question 2

For which of the following firms is patent protection of vital importance?

Accepted Answer

Patent protection is essential for pharmaceutical firms to protect their innovations and recoup the substantial investment in research and development, as well as to avoid copycat competitors.

Question 3

Experience with patents in the pharmaceutical industry shows that when patents on drugs expire,

Accepted Answer

When patents on drugs expire, other firms are free to produce chemically identical drugs. This leads to competition which reduces the profits of the firms that received patents. While doctors may recommend brand-name drugs, many patients may opt for cheaper generic versions once they become available. Prices may not remain high without patent protection because generic versions are typically much cheaper. While firms may try to obtain additional patent protection through cosmetic changes, this is not always successful and may face legal challenges.

Question 4

One reason patent protection is vitally important to pharmaceutical firms is

Accepted Answer

The approval process for new drugs through the Food and Drug Administration is a long and costly process, and patents enable pharmaceutical firms to recover their costs during this process. Without patents, pharmaceutical firms may not be able to recover their costs, which would discourage investment in research and development for new drugs.

Question 5

A successful trademark is one that becomes a generic name for a product, for example, 'Kleenex' has become a generic term for tissues.

Accepted Answer

The answer of A successful trademark is one that becomes...

Question 6

Many biologic drug manufacturers are pushing for patent protection to be extended to 12 years before generics are allowed to be introduced to the market. This reflects which of the following barriers to entry?

Accepted Answer

Extending patent protection to 12 years would block entry by potential generic manufacturers, which falls under the category of entry blocked by government action.

Question 7

When a firm has been granted a trademark, which grants legal protection against other firms using the name of the product that has been granted the trademark, the firm

Accepted Answer

Even with a granted trademark, the firm still faces the risk of genericization, where the name becomes so widely used that it no longer signifies a particular brand, but rather the product itself (like Kleenex or Band-Aid).

Question 8

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale. The main reason for the elimination of profits is

Accepted Answer

After 20 years, patent protection ends and other firms can start producing less expensive generic versions of the drug. This increases competition in the market and reduces the economic profits that the original firm was making. As a result, profits are eliminated. Option A and B are not relevant to the elimination of profits in this case, and option C does not explain why profits are eliminated specifically after 20 years.

Question 9

A patent or copyright is a barrier to entry based on

Accepted Answer

A patent or copyright is a government-granted monopoly that aims to prevent others from copying or using a particular invention or creation without permission. This legal protection is a barrier to entry, as it prevents competitors from entering the market with similar products or services, thereby protecting the producer's profitability.

Question 10

When the government wants to give an exclusive right to one firm to produce a product, it

Accepted Answer

Granting a patent or copyright to an individual or firm gives them exclusive right to produce and sell their product for a certain amount of time, typically 20 years in the case of patents. This allows the firm to have a monopoly on the product but also incentivizes innovation and research and development. Tariffs and quotas are used to protect domestic industries from foreign competition, while antitrust laws are used to prevent monopolies and promote competition.

Question 11

A patent

Accepted Answer

A patent gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented. It allows the holder to prevent others from making, selling or using the product without their permission.

Question 12

Ordinarily, governments attempt to promote competition in markets. Why do governments use patents to block entry into some markets when this prohibits competition?

Accepted Answer

Patents are used to protect and reward innovation by giving firms a temporary monopoly on their inventions or products. This incentivizes firms to invest in research and development, ultimately leading to the creation of new and improved products that benefit consumers. By granting exclusivity, patents provide a means for firms to recoup their investment and generate revenue, which in turn incentivizes further innovation. While the temporary monopoly goes against the principles of competition, it is seen as a necessary trade-off to promote long-term innovation and growth.

Question 13

Governments grant patents to

Accepted Answer

Patents are granted to compensate firms for the research and development costs incurred in creating a new product or process. The exclusive rights to the patented invention granted to the inventor or firm allows them to recoup their costs and earn profits through licensing or commercialization of the invention.

Question 14

________ describes the actions a firm takes to maintain the differentiation of its product over time.

Accepted Answer

Brand management involves various strategies that a firm takes to maintain the differentiation of its product over time. It includes building brand equity, creating a unique brand image, developing brand loyalty, and consistently delivering quality products/services to customers.

Question 15

Which of the following is a disadvantage of trademarking a firm's product?

Accepted Answer

If a trademark becomes too commonly used to describe a particular product type or category, it can become a generic term, which means it is no longer protected as the exclusive brand name of a particular firm. This means that other companies competing in the same market are able to use the same term to describe their products, reducing the uniqueness and distinctiveness that comes with a legally protected brand name.

Question 16

The 10-year protection period from generic competition for drug manufacturers is a form of

Accepted Answer

The 10-year protection period from generic competition for drug manufacturers is a form of patent protection. This allows the manufacturer to have exclusive rights to produce and sell the drug for a certain period of time before other companies can make generic versions.

Question 17

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

Accepted Answer

The answer of Most pharmaceutical firms selling prescription drugs continue...

Question 18

Governments grant patents to encourage

Accepted Answer

Governments grant patents in order to incentivize and reward research and development on new products. Patents give inventors a temporary monopoly on their invention, allowing them to profit from their idea and recoup the costs associated with developing it. This, in turn, encourages individuals and companies to invest in new ideas and technologies.

Question 19

Which of the following is true of trademarks?

Accepted Answer

A successful trademark is one that allows consumers to immediately identify the source or producer of the product. While it may seem beneficial for a trademark to become a generic term, this actually weakens its legal protection as it becomes difficult to prevent other firms from using the term. Additionally, trademark protection only applies to the specific product or service for which it is registered, and does not prevent other firms from producing similar products or services. Trademarks also do not necessarily limit sales in a particular geographic area.

Question 20

A trademark is

Accepted Answer

A trademark is a symbol, logo, or name that identifies and distinguishes a product or service from others in the market. It serves as a unique identifier of a company's brand and can provide legal protection against unauthorized use or infringement by competitors. It is not a legal instrument that grants a firm the right to differentiate its product, a right to position a firm's product in high-traffic public areas, or a patent on a firm's product.

Quiz 14: Government Intervention in the Market