In the United States, exclusive patent rights last for 20 years. A patent gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time. Patent and Trademark Office, as well as the U.S. To Promote the Progress of Science and Useful Arts, by securing for limited Times to Authors and Inventors the Exclusive Right to their Writings and Discoveries.” Congress used this power to create the U.S. To prevent this from happening, the Constitution of the United States specifies in Article I, Section 8: “The Congress shall have Power. Given this possibility, many firms would choose not to invest in research and development, and as a result, the world would have less innovation. In this world of near ubiquitous information, other companies could take the formula, produce the drug, and because they did not incur the costs of research and development (R&D), undercut the price of the company that discovered the drug. Suppose a company invests in research and development and finds the cure for the common cold. Innovation takes time and resources to achieve. As a consequence, the government allows producers to become regulated monopolies, to insure that an appropriate amount of these products is provided to consumers. Most legal monopolies are considered utilities-products necessary for everyday life-that are socially beneficial to have. Many states or cities have laws or regulations that allow households a choice of only one electric company, one water company, and one company to pick up the garbage. Postal Service is legally allowed to deliver first-class mail. Legal Monopolyįor some products, the government erects barriers to entry by prohibiting or limiting competition.
The other is natural monopoly, where the barriers to entry are something other than legal prohibition. One is legal monopoly, where laws prohibit (or severely limit) competition. There are two types of monopoly, based on the kinds of barriers to entry they exploit. Describe and differentiate between barriers to entry.Explain how economies of scale and the control of natural resources lead to natural monopolies.Describe and give examples of legal monopolies.
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