BUSI 1600U Chapter 2: Understanding Canadian Business [BUSI1600] - Chapter 2 Notes

Why does the government issue patents? The government issues patents:

 

(i) to limit excessive economic profits in the short run before new firms have had time to enter profitable markets. 

(ii) to encourage competition among firms in markets with barriers to entry. 

(iii) to prevent firms from keeping secrets on how a product is made. 

(iv) to ensure that new products are safe and effective for consumers.

(v) to encourage firms to spend money on the research and development necessary to create new products 

High product differentiation is generally accompanied by

 

A. Higher profit margins and lower costs

 

B. Decreased emphasis on competition based on price

 

C. Higher market share

 

D. Significant economies of scale