Question

figure: monopoly 7 under michael kremer's patent-buyout proposal, the government would buy the rights to the firm in this figure's patent for at least: $40. $50. $30. $10.

Answer 1

The government should purchase the patent rights under Michael Kremer's patent-buyout proposal for at least $52 million, representing the social value of innovation investment, which exceeds the firm's private capability of $30 million at an 8% interest rate.

Step-by-step explanation:

Under Michael Kremer's patent-buyout proposal, the government aims to match the socially optimal level of innovation investment by purchasing patents. Considering a society's perspective, the optimal investment at an 8% interest rate would be $52 million, which differs significantly from the firm's private investment capability of $30 million. To align the firm's investment with the social optimum, the government would need to purchase the patent rights for at least the social value of $52 million, encouraging the firm to invest in innovating without the constraints of only capturing private benefits.

Answer 2

Under Michael Kremer's patent-buyout proposal, the government would buy the rights to the firm in this figure's patent for at least $50 (option B)

What is the Michael Kremer's patent-buyout proposal?

Michael Kremer, esteemed Nobel laureate in Economics, introduced the concept of a "patent buyout" to stimulate innovation while concurrently facilitating wider accessibility to pivotal technologies.

His seminal exposition, "Patent Buyouts: A Mechanism for Encouraging Innovation," delineates an ingenious framework aimed at revolutionizing the nexus between incentivizing inventive strides and fostering extensive societal access.

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