Patents may be granted in order to seek to avoid which market problem?
A) Price fixing
B) Free riders
C) Moral hazard
E) Natural monopolies
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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Learn more about this topic:
from CLEP Introductory Business Law: Study Guide & Test PrepChapter 16 / Lesson 7