1) How would a purely competitive industry adjust and restore allocative efficie
ID: 2440015 • Letter: 1
Question
1) How would a purely competitive industry adjust and restore allocative efficiency when there is a change in the supply of a resource such as Android software to produce Android phones? In answering, be specific how the increase or decrease in the cost of producing Android phones due to the changes in patent will affect the allocative efficiency.
2) What is the concept of creative destruction? Describe two industry examples and how it has worked overtime.
3) Assess the arguments for and against patents in terms of creative destruction. In answering, distinguish products that can be easily reproduced and differentiation is difficult with products can be hardly reproduced and differentiation is relatively easy.
Explanation / Answer
Answer:
Argument against creative destruction: it has reduced the length of the patents which is not good for welfare as long patents are needed to maximize social welfare. It creates loss to the economy
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