Question

Consider the market for electronics. Patents are granted to investors of a product or process for a certain number of years. The reason for this is to encourage innovation in the economy, without the existence of patents; it is argued that research and development for improved electronics is unlikely to take place, since there's nothing preventing another firm from stealing the idea, copying the product, and producing it.Which of the following best explains the barriers to entry that exist in this scenario?a. Legal barriersb. Exclusive ownership of a necessary resourcec. Economies of scale

Answer 1

The answer is a. Legal barriers.

Step-by-step explanation:

As government granted patent, copyright, trademark for a player in electronics market, they legally protect the intellectual right of that player. As a result, the government also have set up a legal barrier for any potential new players who want to join the market from taking the existing best ideas/ innovation from their starting, instead, they will have to either purchase the patent or invest in R&D for keeping up with the market most modern technology; both at a very high cost.

Ultimately, this type of legal protection will create a barrier to enter for any new player as they will have to prepare for huge expenditure for getting the best technologies at the time.