1. A patent increases the incentive to develop new products because it                     the price of the product and thus generates profit to cover a firm’s costs of                          . 2....

1. A patent increases the incentive to develop new products because it
the price of the product and thus generates profit to cover a firm’s costs of
 .

2. In some cases, a patent is socially inefficient because it merely
 ; in other cases, a patent is socially beneficial because it
.

3. Consider the arthritis drug example on page 575. If the research and development costs are $20 million, Flexjoint will develop the drug if it gets a patent that lasts at least
 years.

4. To prolong their monopoly power, the producers of branded drugs pay millions of dollars to

. (Related to Application 3 on page 575.)