Economic Paper

WA 3 hints

For WA 3 you are looking at patents

• Patents are a form of barrier of entry that confer the holder an exclusive right to produce a good.

• Patents last about 20 years. • Related to this are Copyrights, which last the creator’s lifetime and

may cover 70 years after the creator’s death for the heir’s. • Both are incentives to develop new products or new ways of making

existing products.

Perfectly Competition vs. Monopolies

• Perfectly Competitive, the profit- maximizing quantity is found when 𝑃𝑃 = 𝑀𝑀𝑀𝑀, 𝑃𝑃 = 𝑀𝑀𝑀𝑀 = 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷

• For a Monopoly, the profit- maximizing quantity is found when 𝑀𝑀𝑀𝑀 = 𝑀𝑀𝑀𝑀, but 𝑀𝑀𝑀𝑀 ≠ 𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷𝐷, 𝑠𝑠𝑠𝑠 𝑃𝑃 > 𝑀𝑀𝑀𝑀 = 𝑀𝑀𝑀𝑀.

• 𝑃𝑃𝑀𝑀 > 𝑃𝑃𝑃𝑃𝑃𝑃 & 𝑄𝑄𝑀𝑀 < 𝑄𝑄𝑃𝑃𝑃𝑃. • That is, prices are higher and quantity

is lower for a Monopoly than a Perfectly Competitive market.