10. Monopoly profits derived from patents have a paradoxical impact on resource allocation. The monopoly rights granted...

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10. Monopoly profits derived from patents have a paradoxical impact on resource allocation. The monopoly rights granted by a patent encourage entrepreneurs to improve products and develop lower-cost methods of production. However, once a product or process has been discovered, the monopoly rights permit the firm to restrict output and raise price above the current marginal (and average) cost of production.

Thus, for ideal efficiency, the criteria of static and dynamic economics are in conflict.

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Economics Private And Public Choice

ISBN: 9780123110404

2nd Edition

Authors: James D Gwartney; Richard Stroup; A H Studenmund

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