Question

A company that formerly produced music cds went out of business because too many potential customers bought illegally-produced copies of the cds instead of buying the product directly from the company. this instance serves as an example of
a. market power.
b. inefficient trade.
c. inadequate enforcement of property rights.
d. the invisible hand at work.

Answer 1

The answer is: c. inadequate enforcement of property rights

It is in the behavior of consumers that they will always opt to choose lower prices for the same commodity. Illegal copies are cheap because they did not buy the rights from the owner. However, consumers would most likely not take this into consideration as long as it's the same commodity offered at a cheaper price. To avoid this instance, enforcement must be taken into focus. The government must make sure that these illegal copies are out of sight and the people involved in making them would be properly sanctioned.