Where the words come from
The definitions of dynamic and static efficiency, innovation through new production processes and new products, why firms innovate under competition, the need for ex post market power, and the inverted-U finding of Aghion and others — Productivity and competition: a summary of the evidence (CMA45, 2015), Competition and Markets Authority, GOV.UK, Open Government Licence v3.0. https://www.gov.uk/government/publications/productivity-and-competition-a-summary-of-the-evidence. Changes: Definitions from Annex A paragraphs A.12 and A.13, condensed; the two kinds of innovation from paragraph 3.17 ("technological improvements of production processes, or the creation of new products and services") given a card each, with the card definitions and examples ours; the reasons firms innovate and the need for ex post market power from paragraph 3.28, reworded; the inverted-U result from paragraph 3.30, with "based on UK data" as "studying UK firms"; in the third explain, the clause on a monopoly making the same old products in the same old way is condensed from 2e 9.2 and credited under openstax2e; the productive and allocative efficiency clauses in the first explain block condensed from A.12, with "the price of a product being related to its marginal cost" sharpened to price equalling marginal cost, as A-level specifications state it; British spelling kept.
Why innovation needs protection from copying, and patents as a temporary monopoly that rewards it — Principles of Economics 2e, OpenStax, licensed CC BY 4.0. https://openstax.org/books/principles-economics-2e/pages/9-1-how-monopolies-form-barriers-to-entry and https://openstax.org/books/principles-economics-2e/pages/13-1-why-the-private-sector-underinvests-in-innovation. Changes: The cure-for-the-common-cold case in 9.1 condensed to a drug company in general; 13.1's "temporary edge over its competitors and thus an ability to earn above-normal profits before competitors can catch up" condensed; the final sentence, that the profit can pay for the next round of research, is ours.
The counterbalancing incentives of monopoly over time, the quiet-life point, and perfect competition assuming away new technology — Principles of Economics 2e, OpenStax, licensed CC BY 4.0. https://openstax.org/books/principles-economics-2e/pages/9-2-how-a-profit-maximizing-monopoly-chooses-output-and-price and https://openstax.org/books/principles-economics-2e/pages/8-4-efficiency-in-perfectly-competitive-markets. Changes: 9.2's "firms may strive for new inventions and new intellectual property because they want to become monopolies and earn high profits—at least for a few years until the competition catches up" and "can just produce the same old products in the same old way—while still ringing up a healthy rate of profit" condensed; 8.4's list of what the model assumes away cut to inventions of new technology; the clause that normal profit leaves little for research, and the statically-inefficient-but-dynamically-efficient conclusion, are ours; the AT&T case left out.
Questions, options, diagrams and feedback are our own. Figures credited to a source above are that source's; every other figure is invented to show the method.