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A patent gives inventors the exclusive right to produce and market a product for a period of time. GCR Company is a profit-maximizing firm. It
A patent gives inventors the exclusive right to produce and market a product for a period of time. GCR Company is a profit-maximizing firm. It has a patent for a unique antispyware computer program called Aspy. (a) Assume that GCR is making economic profit. Draw a correctly labeled graph and show the profit-maximizing price and quantity. (b) Assume that the government imposes a lump-sum tax on GCR. i. What will happen to output and market price? Explain. ii. What will happen to GCR's profits? (c) Assume instead that the government grants a per-unit subsidy to GCR for Aspy. i. What will happen to output and market price? Explain. ii. What will happen to GCR's profits? (d) Now assume that GCR's patent on Aspy expires. What will happen to GCR's economic profits in the long run? Explain
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