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ECON 2010 Test 2 (aced the test and got 96%)

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Louisiana State University
ECON 2010

ECON 2010 Test 2Chapter 10New Growth TheoryA model of longrun economic growth that emphasizes that technological change is influenced by economic incentives and so is determined by the working of the market systemIn addition to physical capital we also add in knowledge capitaloPhysical capital has diminishing returnsoKnowledge capital is prone to increasing returnsIncreasing returns can exist because knowledge once discovered becomes available to everyone For the most part knowledge capital is immune to depreciationPatents and CopyrightsPatentsGives a firm the exclusive legal right to a new product for a period of 20 years from the date the product is inventedIn filing for a patent a firm must disclose information about the product or processPatents are issued to make the Research and Development of a product worthwhile for the developers allowing them to have a monopoly on the product for a given amount of timeDrug companies run into problems with the length of patentsoSince the time starts from the date that the patent was issued by the time that the FDA has approved the drug in some cases the patent has either expired or is about to expireThe patent office is dependent on the revenues from people submitting patents and therefore will approve almost all of themoThis can lead to complicationsFor instanceIn the process of making a cell phone the patents are owned by many different companies No one company can make a phone without ripping a ideaproduct from another companyThis leads to vast partnerships between the manufacturersCopyrightsUnder US law the creator of a book film or other artistic work has the exclusive right to the creation during their lifetimeThe creators heirs retain the rights for 70 years after their deathoThe reason for the 70 year mark is because the first Mickey Mouse cartoon was created in 1923 and the Disney family continues to bribe Congress to keep the work under their controlCopyright laws have become so broad to the point where soon no new music will be able to be created because of copyright infringementSubsidizing Research and DevelopmentIn the US the government carries out some research directlyoThe National Institutes of Health conducts medical research for exampleAlso the government provides tax benefits to firms that invest in RD
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