Question : 11) One reason patent protection vitally important to pharmaceutical firms : 1244628

11) One reason patent protection is vitally important to pharmaceutical firms is

A) successful new drugs are not profitable. If firms are not granted patents many would go out of business and health care would be severely diminished.

B) the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly. Patents enable firms to recover costs incurred during this process.

C) that taxes on profits from drugs are very high; profits from patent protection enable firms to pay these taxes.

D) the high salaries pharmaceutical firms pay to scientists and doctors make their labor costs higher than for any other business. Profits from patents are needed to pay these labor costs.

12) Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale. The main reason for the elimination of profits is

A) after 20 years most people who have taken the drug have passed away or are cured of the illness the drug was intended to treat.

B) firms sell their patent rights to other firms so that they can concentrate on finding drugs to treat new illnesses.

C) the quantity demanded of the drug has increased enough that the demand becomes inelastic and revenue falls.

D) after 20 years patent protection is ended and other firms can produce less expensive generic versions of the drug.

13) What is the difference between a public franchise and a public enterprise?

A) A public franchise grants a firm the right to be the sole legal provider of a good or service. A public enterprise refers to a service that is provided directly to consumers through the government.

B) A public enterprise grants a firm the right to be the sole legal provider of a good or service. A public franchise refers to a service that is provided directly to consumers through the government.

C) A public enterprise is owned by the public through its holdings of shares of stock in the enterprise. A public franchise is a firm owned by the government.

D) Both refer to a service provided directly to consumers through the government, but “public franchise” is a term more commonly used in the United States while “public enterprise” is more commonly used in European countries.

14) The United States Post Office

A) faces no competition for its mail services.

B) has a monopoly in the provision of first-class mail service.

C) can safely ignore the prices for mail services charges by its rivals such as FedEx and UPS.

15) The Aluminum Company of America (Alcoa) had a monopoly until the 1940s because

A) it was a public enterprise.

B) it had a patent on the manufacture of aluminum.

C) the company had a secret technique for making aluminum from bauxite.

D) it had control of almost all the available supply of bauxite.

16) In 1935, the U.S. Patent and Trademark Office issued Parker Brothers a trademark on the

use of the name Monopoly for a board game. Hasbro bought Parker Brothers in 1991. Which of the following statements is true regarding the trademark on the name Monopoly for a board game?

A) The original trademark expired well before Hasbro bought Parker Brothers, so they never had a trademark on Monopoly.

B) Trademarks never expire, so Hasbro continues to have a trademark on the name Monopoly.

C) The trademark expired in 2011, 20 years after Hasbro’s purchase of Parker Brothers.

D) The trademark expired in 1955, 20 years after the trademark was issued to Parker Brothers.

17) The De Beers Company, one of the longest-lived monopolies, is facing increasing competition. One source of competition comes from people who might resell their previously owned diamonds. Why is De Beers worried that people might resell their previously owned diamonds?

A) because De Beers will not be able to guarantee the quality of previously owned diamonds and fears that its reputation might be harmed

B) because the availability of previously owned diamonds would increase the market demand for diamonds and dilute De Beers’ monopoly

C) because previously owned diamonds would be a close substitute to newly mined diamonds and therefore reduce De Beers’ market power

D) because the availability of previously owned diamonds would make the market demand curve for diamonds more inelastic and force De Beers to lower its price

18) What is a network externality?

A) It refers to having a network of suppliers and buyers for a good or service.

B) It refers to lobbying to form a public enterprise.

C) It refers to a situation in which a product’s usefulness increases with the number of people using it.

D) It refers to a product that requires connection to a network for it to be useful.

19) A virtuous cycle occurs

A) when lobbyists petition members of Congress to grant a public franchise; the lobbyist then raise money for those Congress members who granted the franchise.

B) when monopoly profits are used to create new products for additional monopoly profits.

C) when a firm can attract enough buyers initially to increase a product’s usefulness to attract even more buyers.

D) when a firm’s sales volume reaches a level where the firm can take advantage of economies of scale; thereby reducing the price of the product to further boost its sales.

20) For a natural monopoly to exist

A) a firm must continually buy up its rivals.

B) a firm’s long-run average cost curve must exhibit diseconomies of scale beyond the economically efficient output level.

C) a firm’s long-run average cost curve must exhibit economies of scale throughout the relevant range of market demand.

D) a firm must have a government-imposed barrier.