Patents may be granted in order to seek to avoid which market problem? A) Price fixing B) Free...

Question:

Patents may be granted in order to seek to avoid which market problem?

A) Price fixing

B) Free riders

C) Moral hazard

D) Collusion

E) Natural monopolies

Patents:

A patent can protect a process, a new design, or a new invention from competitors that wish to steal and use the technology. If a competitor decides to steal an invention, the inventor can pursue legal action against the violator.

Answer and Explanation:

The best answer here is E) Natural monopolies. This may seem counterintuitive because patents are basically legal monopolies for the production of a certain product. However, in order to gain this protection, the inventor must disclose how it works. Also, the protection only lasts 20 years so a long term monopoly cannot develop.


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Patent Infringements: Definition and Cases

from CLEP Introductory Business Law: Study Guide & Test Prep

Chapter 16 / Lesson 7
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