uni economics help!! urgent

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Lillie_t_4
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I know it's a long question, but this is due in 2.5hrs and I'm really suck on how to answer - any help would be VERY VERY APPRECIATED - THANK YOU
investors of new products enjoy the right to be the sole producer for a certain period of time due to their having patent rights. We know presence of monopoly reduces efficiency and welfare and yet this is really a regulation-created monopoly. Explain the rationale behind having a system of patent rights. Discuss also the rationale that in order to obtain the patent, the knowledge regarding the new technology has to be published -i.e., put into the public domain.
Explain also why the duration during which a patent lasts is crucial.
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SirSaltyofSussex
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Rationale behind a system of patent righst:
It encourages research and development (which can lead to improvements in efficiency, and in turn, an increase in the potential output of an economy and profits of firms, which may have an effect on investment expenditure): firms are generally profit-motivated and the ability to obtain a patent for technology would put them at an advantage over their competitors is an incentive to allocate a greater proportion of their cash reserves towards innovation.

Rationale that the knowledge regarding the new technology has to be published:
On one hand, it allows others to build on the research to develop separate innovative products and productive methods, leading to greater improvements in efficiency (and the aforementioned effects of improved efficiency) than if the research was kept secret.
On the other hand, it results in patent thickets and merely leads to other firms making small adjustments to the technology such that they can work around the patent rather than building upon the research.

Why the duration during which a patent lasts is crucial:
The duration which the patent lasts refers to the amount of time during which the firm which developed the patented product/productive method has total exclusivity in the market. This means that the firm has an advantage over competitors (either by producing more efficiently in the case of a patented productive method or by selling a differentiated product in the case of a patented product) and can experience greater profits. This may lead to other firms shutting down depending on how long the duration of the patent is, resulting in massive increases in the market power of the firm with the patent.

**Keep in mind I currently only study economics in the IB diploma at school so I guess more depth is needed for you uni guys.
Last edited by SirSaltyofSussex; 1 year ago
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Lillie_t_4
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(Original post by SirSaltyofSussex)
Rationale behind a system of patent righst:
It encourages research and development (which can lead to improvements in efficiency, and in turn, an increase in the potential output of an economy and profits of firms, which may have an effect on investment expenditure): firms are generally profit-motivated and the ability to obtain a patent for technology would put them at an advantage over their competitors is an incentive to allocate a greater proportion of their cash reserves towards innovation.

Rationale that the knowledge regarding the new technology has to be published:
On one hand, it allows others to build on the research to develop separate innovative products and productive methods, leading to greater improvements in efficiency (and the aforementioned effects of improved efficiency) than if the research was kept secret.
On the other hand, it results in patent thickets and merely leads to other firms making small adjustments to the technology such that they can work around the patent rather than building upon the research.

Why the duration during which a patent lasts is crucial:
The duration which the patent lasts refers to the amount of time during which the firm which developed the patented product/productive method has total exclusivity in the market. This means that the firm has an advantage over competitors (either by producing more efficiently in the case of a patented productive method or by selling a differentiated product in the case of a patented product) and can experience greater profits. This may lead to other firms shutting down depending on how long the duration of the patent is, resulting in massive increases in the market power of the firm with the patent.

**Keep in mind I currently only study economics in the IB diploma at school so I guess more depth is needed for you uni guys.
Thnakyou so so much, this is really helpful - i really appreciate this !!
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Lillie_t_4
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is there any way to link these to monolpoly?

(Original post by SirSaltyofSussex)
Rationale behind a system of patent righst:
It encourages research and development (which can lead to improvements in efficiency, and in turn, an increase in the potential output of an economy and profits of firms, which may have an effect on investment expenditure): firms are generally profit-motivated and the ability to obtain a patent for technology would put them at an advantage over their competitors is an incentive to allocate a greater proportion of their cash reserves towards innovation.

Rationale that the knowledge regarding the new technology has to be published:
On one hand, it allows others to build on the research to develop separate innovative products and productive methods, leading to greater improvements in efficiency (and the aforementioned effects of improved efficiency) than if the research was kept secret.
On the other hand, it results in patent thickets and merely leads to other firms making small adjustments to the technology such that they can work around the patent rather than building upon the research.

Why the duration during which a patent lasts is crucial:
The duration which the patent lasts refers to the amount of time during which the firm which developed the patented product/productive method has total exclusivity in the market. This means that the firm has an advantage over competitors (either by producing more efficiently in the case of a patented productive method or by selling a differentiated product in the case of a patented product) and can experience greater profits. This may lead to other firms shutting down depending on how long the duration of the patent is, resulting in massive increases in the market power of the firm with the patent.

**Keep in mind I currently only study economics in the IB diploma at school so I guess more depth is needed for you uni guys.
is there any way to link these to monopoly aswell? I'm writing about patent but my lecture says dont forget monopoly
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