Question

What effect do patents have on competition ? They reduce competition by fixing the price of the product so it cannot fall. They reduce competition by creating a barrier to new companies entering a market . They increase competition by encouraging new companies to enter a market . They increase competition by putting downward pressure on price .

Answer 1

Patents can create barriers to entry and reduce competition, but they can also encourage innovation and increase competition in the long run.

Step-by-step explanation:

Patents can have both positive and negative effects on competition. While they do create a barrier to entry for new companies, they also incentivize innovation and may increase competition in the long run.

On one hand, patents can reduce competition by creating a barrier for new companies to enter a market. This is because patents give the inventor the exclusive legal right to make, use, or sell the invention for a limited time. This prevents other companies from producing or selling the patented product, limiting competition.

On the other hand, patents can also increase competition by encouraging new companies to enter the market. When a company invents a new product and obtains a patent, they have a temporary monopoly over that product. However, this also creates an opportunity for other companies to innovate and create alternative products. The expiration of the patent then allows these new competitors to enter the market, which can lead to increased competition and potentially lower prices.