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 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 and destroy the patent.
D) The government should place a price control on the monopoly's product.

Question

Quizplus · Accepted Answer

Michael Kremer proposed that the government should buy out the rights of the patent from the monopoly and destroy the patent. This would eliminate the monopoly's ability to charge a high price for their innovative product, leading to a reduction in deadweight loss. However, the drive to innovate would be uncompromised because the monopoly would still be able to profit from their innovation through their temporary market power before the patent is bought out.

Economist Michael Kremer Offered a Unique Solution to the Problem