Question 1

A patent or copyright is a barrier to entry based on

Accepted Answer

A patent or copyright is a legal monopoly granted by the government to protect the creator's exclusive rights to produce and sell the product or idea. It is a government action which limits the entry of competitors into the market, making it choice C.

Question 2

Governments grant patents to encourage

Accepted Answer

Governments grant patents to encourage research and development on new products. A patent provides exclusive rights to the inventor for a certain period of time, giving them the ability to profit from their innovation and encourage further innovation in the future.

Question 3

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

Accepted Answer

A trademark is a legal protection for brand names, logos, and slogans. It allows the firm to prevent competitors from using a similar name for their own products. Possible infringements can be contested in court. Patents protect inventions, but not brand names. Copyrights protect creative works, such as books or songs, but do not apply to brand names. Increasing advertising spending can help enhance the reputation of a brand, but it does not provide legal protection.

Question 4

What does a patent do?

Accepted Answer

A patent gives the inventor or firm the exclusive right to a new product or invention for a period of 20 years from the date of invention. This means that other companies or individuals cannot manufacture, sell or use the invention without permission during this time period. Option A and B are incorrect as they refer to copyright, not patents. Option D is also incorrect as the exclusive right to the product is for 20 years, not for the inventor's lifetime.

Question 5

Define the tragedy of the commons.Give three examples of common resources.Briefly explain why common property resources are subject to overuse.
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Accepted Answer

The answer of Define the tragedy of the commons.Give three...

Question 6

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 can be lengthy and costly. Patents allow pharmaceutical firms to have exclusivity over the sale of a drug, which enables them to recover the costs incurred during the approval process. Without patents, firms may not be able to recoup these costs and may not have the financial incentive to invest in the development of new drugs.

Question 7

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

Accepted Answer

Patent protection is especially important for pharmaceutical firms as their products usually require extensive research and development, making patents crucial in protecting their intellectual property and ensuring that they can recoup their investment.

Question 8

How does a public good differ from a quasi-public good? In your answer give an example of each type of good.
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Accepted Answer

The answer of How does a public good differ from...

Question 9

What is a trademark?

Accepted Answer

A trademark is a distinctive sign or symbol (such as a logo, word, or phrase) that identifies and distinguishes a product or service from those of other firms. It is a form of intellectual property that grants legal protection and exclusive rights to use the trademarked symbol for commercial purposes. Trademarks are important for creating brand recognition and loyalty among consumers.

Question 10

Explain how the decision by parents to not immunise their children,hoping that their children will not get sick because other parents have had their children immunised,is an example of free riding.How is this behaviour dangerous to the public?
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Accepted Answer

The answer of Explain how the decision by parents to...

Question 11

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 encourage firms to spend money on research necessary to create new products. By granting patents to inventors, the government provides an incentive for firms to invest in research and development, knowing that they will have a period of exclusive rights to sell their new product. This can lead to the creation of new and innovative products, which ultimately benefits consumers. However, this also means that other firms are barred from entering the market with similar products for a certain period of time. This temporary restriction on competition is seen as a necessary evil in order to incentivize innovation.

Question 12

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

Accepted Answer

Brand management refers to the actions a firm takes to maintain the differentiation of its product over time. This includes strategies such as consistent branding, quality control, and innovation to stay ahead of competitors. The other options listed may contribute to brand management, but they do not fully encompass it.

Question 13

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 if a firm has been granted a trademark, there is still a risk that the name may become a generic term and lose its association with the specific company. This is known as "genericide." Examples of former trademark names that have become generic terms include Kleenex, Band-Aid, and Xerox. Therefore, the firm must continue to monitor and protect its trademark from becoming genericized.

Question 14

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 a trademark may become well-known and associated with a particular product, it is not the goal for it to become a generic term. The purpose of a trademark is to protect the unique identity of a brand and prevent others from using it in a way that causes confusion for consumers. A trademark does not prevent other firms from producing similar products, but it does prevent them from using a similar mark that could lead consumers to think they are buying from the same source. A trademark also only applies to a specific category of goods or services and does not prevent other firms from selling in the same geographic area, as long as they are not using a confusingly similar mark.

Question 15

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, the patent protection for the drug ends, and other firms can produce less expensive generic versions. As a result, competition increases, causing price to decline, and economic profits from selling the drug to be eliminated.

Question 16

A disadvantage of trademarking a firm's product is

Accepted Answer

Over time, trademarks may become so widely used that they become a generic term for a product category, which can cause the trademark to lose its legal protection. This means that anyone can use the term to describe their own product, which can lead to a loss of brand identity and market share for the original firm.

Question 17

Why do governments grant patents?

Accepted Answer

Governments grant patents to compensate firms for their investment in research and development costs. This encourages firms to invest in innovation and develop new products, which can benefit society overall. By granting patents, the government provides an artificial monopoly to the firm for a limited period, thus providing a return on investment for their efforts.

Question 18

What does a government do when it wants to give an exclusive right to one firm to produce a product?

Accepted Answer

Granting a patent or copyright to an individual or firm enables them to have exclusive rights to produce a product or service for a certain period of time.

Question 19

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

The barrier to entry in this case is government action, specifically the extension of patent protection. This creates a hurdle for potential competitors to enter the market, as they cannot produce and sell a generic version of the drug for 12 years.

Question 20

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 increases competition in the market and reduces the profits that had been earned by the firms that received patents. Therefore, prices tend to go down without patent protection. While firms may attempt to obtain additional patent protection through minor changes to the drug, this is not always successful and does not necessarily result in continued high prices. Patients may also choose to switch to generic alternatives rather than continue to buy brand-name drugs. Therefore, options A, B, and D are not entirely accurate.

Quiz 11: Government Intervention in the Market