Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 10 - Part IV - Externalities - Questions for Review - Page 212: 3

Answer

Patents help solve the external problem of technology breakthroughs. The patents law protect the rights of the inventor by giving them exclusive use of their inventions for a period of time. The patent internalizes the external by giving the firm/inventor the property right over it's invention. When others want to use their invention they need to pay them the royalty that they negotiate.

Work Step by Step

Patents help solve the external problem of technology breakthroughs. The patents law protect the rights of the inventor by giving them exclusive use of their inventions for a period of time. The patent internalizes the external by giving the firm/inventor the property right over it's invention. When others want to use their invention they need to pay them the royalty that they negotiate.
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