1.A patent gives the inventor the monopoly on an idea for a fixed period of time. The patent holder may produce the product or license others to produce it in exchange for a payment called a royalty.

(i)By using a model of licensing with minor patent, graphically show that a profit-maximizing inventoris indifferent between being the only seller of the product andlicensing others to produce and sell it, so long as the product market was competitive prior to the invention.

[6 Marks]

(ii)How does the analysis in part (i) changes for the case of a major patent?

[4 Marks]