Question 1

Network goods are for theoretically the whole market because such goods are sold by monopolies.

Accepted Answer

A) True 
 B)False  False

Question 2

An outcome where both players have played their dominant strategy is a Nash equilibrium.

Accepted Answer

A) True 
 B)False  True

Question 3

Which statement is NOT a feature of markets for network goods?

Accepted Answer

A)  Only one network good in each industry can exist at one time. 
B)  When networks are important, the "best" product may not always win. 
C)  Competition in markets for network goods is "for the market" instead of "in the market." 
D)  Monopolies or oligopolies usually sell network goods. 
A)  Only one network good in each industry can exist at one time. 
B)  When networks are important, the "best" product may not always win. 
C)  Competition in markets for network goods is "for the market" instead of "in the market." 
D)  Monopolies or oligopolies usually sell network goods. A

Question 4

A Nash equilibrium is a situation:

Accepted Answer

A)  that maximizes the collective gains to both players. 
B)  in which neither player in the game has an incentive to change strategies given the strategy of the other player. 
C)  in which one player could benefit from changing strategies given the strategy of the other player. 
D)  in which players play nondominant strategies. 
A)  that maximizes the collective gains to both players. 
B)  in which neither player in the game has an incentive to change strategies given the strategy of the other player. 
C)  in which one player could benefit from changing strategies given the strategy of the other player. 
D)  in which players play nondominant strategies.

Question 5

When networks are important, the "best" product may not always win.

Accepted Answer

A) True 
 B)False

Question 6

How has the Internet made the market for videos more contestable?

Accepted Answer

A)  Only professionals can create video content on the Internet. 
B)  It severely limits the amount of content available to consumers. 
C)  It creates new legal barriers to entry in the video distribution business. 
D)  It creates a much cheaper distribution channel than previously available. 
A)  Only professionals can create video content on the Internet. 
B)  It severely limits the amount of content available to consumers. 
C)  It creates new legal barriers to entry in the video distribution business. 
D)  It creates a much cheaper distribution channel than previously available.

Question 7

Most contestable markets have high fixed costs.

Accepted Answer

A) True 
 B)False

Question 8

Switching costs are the costs:

Accepted Answer

A)  of turning on the lights. 
B)  associated with keeping your purchases with the same company. 
C)  of switching purchases from one firm to another. 
D)  of coming to an agreement. 
A)  of turning on the lights. 
B)  associated with keeping your purchases with the same company. 
C)  of switching purchases from one firm to another. 
D)  of coming to an agreement.

Question 9

Which increases the contestability of a market?
I. low fixed costs of entry
II. no legal barriers to entry
III. consumers are willing to try substitute goods

Accepted Answer

A)  I, II, and III 
B)  II and III only 
C)  I only 
D)  II only 
A)  I, II, and III 
B)  II and III only 
C)  I only 
D)  II only

Question 10

Switching costs often:

Accepted Answer

A)  increase contestability. 
B)  maintain contestability. 
C)  limit contestability. 
D)  have various effects on contestability. 
A)  increase contestability. 
B)  maintain contestability. 
C)  limit contestability. 
D)  have various effects on contestability.

Question 11

A coordination game is a situation in which:

Accepted Answer

A)  the players are better off choosing the same strategy than if they choose different strategies, but there is also more than one strategy on which to potentially coordinate. 
B)  all players select the worst outcome. 
C)  no player has an incentive to change his or her strategy unilaterally. 
D)  one's costs are minimized. 
A)  the players are better off choosing the same strategy than if they choose different strategies, but there is also more than one strategy on which to potentially coordinate. 
B)  all players select the worst outcome. 
C)  no player has an incentive to change his or her strategy unilaterally. 
D)  one's costs are minimized.

Question 12

Which is FALSE?

Accepted Answer

A)  Music is a network good. 
B)  Some musicians get lucky and become popular quickly. 
C)  Popularity is less important than musicianship. 
D)  A musician's current success is no guarantee of future success. 
A)  Music is a network good. 
B)  Some musicians get lucky and become popular quickly. 
C)  Popularity is less important than musicianship. 
D)  A musician's current success is no guarantee of future success.

Question 13

Companies that compete for the market and win:

Accepted Answer

A)  stay on top forever. 
B)  are frequently displaced. 
C)  face no subsequent competition. 
D)  are free to raise prices as much as they want. 
A)  stay on top forever. 
B)  are frequently displaced. 
C)  face no subsequent competition. 
D)  are free to raise prices as much as they want.

Question 14

In the case of cable television, contestability is often hampered by:

Accepted Answer

A)  high variable costs. 
B)  low variable costs. 
C)  high fixed costs. 
D)  low fixed costs. 
A)  high variable costs. 
B)  low variable costs. 
C)  high fixed costs. 
D)  low fixed costs.

Question 15

Antitrust authorities have a difficult time with network goods because:

Accepted Answer

A)  they know that with network goods, only a few firms will always dominate the market. 
B)  profits tend to be higher in network markets, and thus firms are willing to fight harder. 
C)  when monopolies exist, there is no competition to help lower prices. 
D)  increased competition can easily lead to corruption in network markets. 
A)  they know that with network goods, only a few firms will always dominate the market. 
B)  profits tend to be higher in network markets, and thus firms are willing to fight harder. 
C)  when monopolies exist, there is no competition to help lower prices. 
D)  increased competition can easily lead to corruption in network markets.

Question 16

Piped water is:

Accepted Answer

A)  easily contested. 
B)  difficult to contest. 
C)  moderately difficult to contest. 
D)  uncontestable. 
A)  easily contested. 
B)  difficult to contest. 
C)  moderately difficult to contest. 
D)  uncontestable.

Question 17

Recall the work of Duncan J. Watts that suggested music has a strong social component. Which of the following would most likely NOT be a close analog to his discovery that some popular music was just lucky?

Accepted Answer

A)  eReaders, such as the Kindle and Nook 
B)  video games that allow you to play with your friends 
C)  trendy restaurants 
D)  celebrities who are famous for being famous 
A)  eReaders, such as the Kindle and Nook 
B)  video games that allow you to play with your friends 
C)  trendy restaurants 
D)  celebrities who are famous for being famous

Question 18

For two players in a game, a Nash equilibrium is different from a dominant strategy in that:

Accepted Answer

A)  the outcome in the Nash equilibrium may not be the best outcome for either of the players. 
B)  the Nash equilibrium always has unequal outcomes whereas the dominant strategy always has even outcomes. 
C)  there is always only one Nash equilibrium, but there may be more than one dominant strategy. 
D)  None of the answers is correct. 
A)  the outcome in the Nash equilibrium may not be the best outcome for either of the players. 
B)  the Nash equilibrium always has unequal outcomes whereas the dominant strategy always has even outcomes. 
C)  there is always only one Nash equilibrium, but there may be more than one dominant strategy. 
D)  None of the answers is correct.

Question 19

Customer loyalty plans are often designed to:

Accepted Answer

A)  increase contestability. 
B)  maintain contestability. 
C)  limit contestability. 
D)  have various effects on contestability. 
A)  increase contestability. 
B)  maintain contestability. 
C)  limit contestability. 
D)  have various effects on contestability.

Question 20

What will determine the final equilibrium in a many-player coordination game?

Accepted Answer

A)  The technically superior standard will always win. 
B)  Accidents of history will determine the final equilibrium. 
C)  People will rally behind the initial underdog. 
D)  No one will be able to make a decision until the government decides for them. 
A)  The technically superior standard will always win. 
B)  Accidents of history will determine the final equilibrium. 
C)  People will rally behind the initial underdog. 
D)  No one will be able to make a decision until the government decides for them.

Exam 16: Competing for Monopoly

Network goods are for theoretically the whole market because such goods are sold by monopolies.

An outcome where both players have played their dominant strategy is a Nash equilibrium.

Which statement is NOT a feature of markets for network goods?

A Nash equilibrium is a situation:

When networks are important, the "best" product may not always win.

How has the Internet made the market for videos more contestable?

Most contestable markets have high fixed costs.

Switching costs are the costs:

Which increases the contestability of a market? I. low fixed costs of entry II. no legal barriers to entry III. consumers are willing to try substitute goods

Switching costs often:

A coordination game is a situation in which:

Which is FALSE?

Companies that compete for the market and win:

In the case of cable television, contestability is often hampered by:

Antitrust authorities have a difficult time with network goods because:

Piped water is:

Recall the work of Duncan J. Watts that suggested music has a strong social component. Which of the following would most likely NOT be a close analog to his discovery that some popular music was just lucky?

For two players in a game, a Nash equilibrium is different from a dominant strategy in that:

Customer loyalty plans are often designed to:

What will determine the final equilibrium in a many-player coordination game?

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Monopoly

Price Discrimination

Oligopoly and Game Theory

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

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