Question

Provide one example of a patent on a product and discuss two reasons why the patent on the product is important to the business that holds that patent. Note - you are being asked why the patent, not the product, is important.

Answer 1

An example of a patent is one held by a pharmaceutical firm on a new drug, which prevents others from manufacturing or selling the drug for 20 years and allows the firm to potentially earn monopoly profits, thus incentivizing research and development.

Step-by-step explanation:

One example of a patent on a product is the patent held by a pharmaceutical firm on a new drug. Such a patent is crucial to the business for two primary reasons. First, it prevents any other firm from manufacturing or selling the drug for a specific period of time, generally 20 years, unless the patent holder grants permission. This exclusivity allows the firm to potentially earn monopoly profits, as there is no competition for that particular product. Second, holding a patent serves as a significant incentive for research and development (R&D). This incentive is essential because it encourages investment in new and innovative products that can lead to advancements in technology and medicine, despite the high cost and risk associated with R&D activities.