Assess the arguments for and against patents in terms of creative destruction
What will be an ideal response?
Some economists argue that the patent system gives the holders too much power, and the outcome is creative destruction. For complicated consumer products that can be differentiated by brand association and costly production costs the patent may be protecting old companies from their new competitors. The innovative rivals may have difficulty entering the market due to the existing patents. For these industries removing patents or decreasing the length protection may foster innovation. For industries where products can be easily reproduced and differentiation is difficult, the patents help companies recover the research and development costs that go into a product. The patent system, in these instances, may promote innovation. The usefulness of the patent system depends on industry.
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To counteract the depreciation of the national currency against the U.S. dollar, the central bank of a country can intervene in the foreign exchange market. Which of the following imposes a restriction on this ability of the central banks to maintain a fixed exchange rate?
a. The central banks have a limited amount of international reserve. b. The central banks have a limited amount of domestic currency. c. Unrestricted sale of foreign currency will cause inflation in the domestic economy. d. The supply of dollars is perfectly elastic in the foreign exchange market. e. The central banks need to maintain a certain amount of its assets in the form of gold.
_____ is any undesirable byproduct of production
Fill in the blank(s) with the appropriate word(s).
Which of the following statements is correct?
a. The total income in the economy that remains after paying for consumption and government purchases is called private saving. b. The sum of private saving and national saving is called public saving. c. For a closed economy, the sum of private saving and public saving must equal investment. d. For a closed economy, the sum of consumption, national saving, and taxes must equal GDP.
Varying plant sizes are shown graphically by
A. economies of scale. B. diseconomies of scale. C. the long-run average costs curve. D. diminishing returns. E. negative returns.