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Brian Wright [email protected] EnvEcon 143, Fall 2011 Economics of Intellectual Property Rights and Innovation Final Exam Instructions: Put...

could you please figure out question 4-(a),(b),(c) ?

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Brian Wright [email protected] EnvEcon 143, Fall 2011 Economics of Intellectual Property Rights and Innovation Final Exam Instructions: Put your name on your Blue Book. Read the whole exam before answering the questions. Each question has equal weight. Answer ALL FOUR (4) questions. Answers need not be long, but they must be to the point. 1. Answer TRUE or FALSE or UNCERTAIN and explain your answer in a few sentences at most. i) The sources of agricultural research funding in developed countries are quite different from those in developing countries. ii) The European Court of Justice recently reached a decision regarding stem cells. iii) It is not possible to obtain a patent on an invention that infringes another patent. iv) Prizes can be better than patents if the government has an accurate idea of the value of the desired innovation. v) Recent legislation changed the rules for patenting so that now the patent goes to the first to file the invention, not the first to invent it. vi) Printing with moveable type was invented by Gutenberg vii) A Starbucks customer started an experiment testing a widely accepted economic hypothesis recently. viii) England was the most developed country in the world in the fifteenth century. ix) If you have a patented innovation that has a complement, which you do not own, you prefer the complement to have no intellectual property protection. 2. 2.1How was river blindness effectively controlled in Africa? Name two chemical or pharmaceutical technologies that were used. (5 points) 2.2 Name the UC Professor associated with this effort? From what college? (5 points) 2.3 Assume the US demand for a pharmaceutical designed for treating people for life- threatening heart-worms is known to be: Q=100 – 10 P, where P is price. The cost of producing the drug is $2.00 per treatment. The producer has a patent on the drug in every country. How much does the producer charge for the drug? Draw a sketch showing the determination of the profit-maximizing price. (5 points)
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2.4 There is a group of river people in Africa who could benefit from the drug because it could prevent the onset of river blindness, but have no money. The drug company donates 100 doses to cure 100 people. It announces it has prevented 100 Africans from contracting river blindness at a cost to the company of $6000.00. Is this claim correct? Explain carefully. (5 points) 2.5 Before the drug is marketed, consumers in the US announce that they are willing to subsidize fully the extra cost the firm incurs from production of any extra units, sold for treating people not dogs sold in the US above the quantity initially planned in 2.3 above, as well as all the 100 units given to the 100 Africans who need it. (The company must sell all US units at one price, no US price discrimination.) How much must US consumers value the treatment of the Africans to make this deal worthwhile for the US consumers? Answer carefully. (5 points) 3 (a) Give an example from history before the 19th century of an economist who described what we now characterize as open-source innovation. (b) Explain from an economic perspective why research on productivity increases for basic food crops like rice and wheat has been predominantly in the public sector, and mostly in large countries. (c) How does the rate of return on agricultural research compare to the return on other investments in developed countries, and in less developed countries? Discuss the implications of your answer for the productivity of agricultural research, and for the observed efficiency of allocation of research resources. (d) Can you identify who gained and who lost from the introduction of Bt (insect resistant) cotton in the United States? (There may be more than one gainer and/or loser). Can you relate the answer to the controversy on introduction of genetically modified organisms? (e) What lessons do you draw from the story of the brown plant hopper and the methods used to defend against this pest? 4. Part A: Assume there is an island with 5 trees of a species that lives nowhere else. Each tree has a probability of 0.5 that it carries a gene that will enable it to produce sap that kills lung cancer. Such a discovery is worth $6.4B. If the probability for each tree is independent, what is: a) the total expected value of preserving the five trees (just for their use in the cure)?
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