Suppose that it would cost a firm $9 million to develop a new drug. In the absence of a patent, other firms will be able to copy and bring to market a generic equivalent of the drug in three years. In each of these three years, the firm would earn monopoly profits of $4 million. A patent will generate monopoly status for the firm for twenty years. If the government knew this information ahead of time, which of the following is most correct?
A. The government should grant a patent to the firm, because the firm would not produce the drug at all without a patent.
B. The government should grant a patent to the firm, because it does not have the resources to determine on a case-by-case basis exactly which inventions merit award of the patent.
C. The government should grant a patent to the firm, because even with a patent the firm will not earn a monopoly profits.
D. The government should not grant a patent to the firm, because the firm would earn sufficient profits to develop the drug without the patent.
Answer: D
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A) -2%. B) 0%. C) 2%. D) 5%.
A pattern in the coefficients of the time fixed effects binary variables may reveal the following in a study of the determinants of state unemployment rates using panel data:
A) macroeconomic effects, which affect all states equally in a given year. B) attitude differences towards unemployment between states. C) there is no economic information that can be retrieved from these coefficients. D) regional effects, which affect all states equally, as long as they are a member of that region.
A country that typically runs a trade deficit is:
A. the United States. B. Germany. C. China. D. Japan.
Stock and Watson found that monetary policy was responsible for about ________% of the reduction in output volatility that occurred in the mid-1980s.
A. 30 to 40 B. 20 to 30 C. 10 to 20 D. 0 to 10