Why does the government grant patents to companies that research new drugs?
What will be an ideal response?
Researching new drugs is a very risky and expensive business. If the government did not grant the firm a patent then all other firms would be able copy its innovation as soon as the FDA approved the drug. This competition would make the price of the drug so low that the research firm would not be able to recoup its investment. The result would be that no new drugs would be developed. By allowing firms with new drugs to hold patents the government encourages private research and development.
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Tommy graduates from college and starts to look for a job. Tommy is
A) cyclically unemployed. B) frictionally unemployed. C) structurally unemployed. D) employed because he is looking for work. E) unnecessarily unemployed.
If a firm triples inputs and produces twice the output, then there are
A) constant returns to scale. B) diminishing marginal product. C) decreasing returns to scale. D) increasing returns to scale.
Economists discourage homeowner bailouts because
a. They encourage irresponsible borrowings b. It increases moral hazard among borrowers c. It punishes responsible borrowers d. All of the above
Any point inside the production possibility curve is:
a. efficient. b. nonfeasible. c. inefficient. d. optimal.