CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Economic analysis suggests that patent laws, which can often be used to limit the entry of potential competitors into an industry, ______
A. may grant temporary monopoly power, but the existence of such laws may also encourage innovation and the development of many items highly valued in society.
B. may be a source of business monopoly power and also discourage innovation and the development of cost-reducing production techniques in the long run.
C. encourage product development and the adoption of cost-reducing technologies in the short run but in the long run generally lead to business monopoly.
Explanation: Patents provide inventors with an incentive to conduct research and development in the pursuit of new products and innovations. The incentive is that if the inventor creates a desirable product, he or she will have a monopoly on its production for 17 years.

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