Question 1

Social networking sites are network goods, so the benefits of using them diminish as they become more popular.

Accepted Answer

A) True 
 B)False

Question 2

Describe the features of markets for network goods.

Accepted Answer

a. Network goods are usually sold by mon

Question 3

If music is a network good, then the "best" musicians:

Accepted Answer

A)  always become popular. 
B)  only sometimes become popular. 
C)  never become popular. 
D)  must deal with antitrust cases against them. 
A)  always become popular. 
B)  only sometimes become popular. 
C)  never become popular. 
D)  must deal with antitrust cases against them.

Question 4

Network goods are usually sold by monopolies or oligopolies because:

Accepted Answer

A)  the government doesn't enforce antitrust laws in network industries. 
B)  there is no benefit to using the product that other consumers use. 
C)  only the government is allowed to sell network goods. 
D)  consumers want to coordinate on the same standard. 
A)  the government doesn't enforce antitrust laws in network industries. 
B)  there is no benefit to using the product that other consumers use. 
C)  only the government is allowed to sell network goods. 
D)  consumers want to coordinate on the same standard.

Question 5

Which is NOT a good example of a network good?

Accepted Answer

A)  photo sharing Web sites 
B)  Internet dating sites 
C)  telephones 
D)  automobiles 
A)  photo sharing Web sites 
B)  Internet dating sites 
C)  telephones 
D)  automobiles

Question 6

Which of the following explains how Facebook limits contestability in social networks?

Accepted Answer

A)  by charging when they exceed a set number of posts 
B)  by encouraging users to load as many photos onto their site as possible 
C)  by passing on increased costs to their users 
D)  by making it easy for users to switch to another social network 
A)  by charging when they exceed a set number of posts 
B)  by encouraging users to load as many photos onto their site as possible 
C)  by passing on increased costs to their users 
D)  by making it easy for users to switch to another social network

Question 7

Firms that operate in contestable markets:

Accepted Answer

A)  still price competitively since they face the threat of competition from new entrants. 
B)  are pure monopolies that set price equal to consumers' highest willingness to pay. 
C)  earn zero economic profits. 
D)  face more competition when fixed costs are high. 
A)  still price competitively since they face the threat of competition from new entrants. 
B)  are pure monopolies that set price equal to consumers' highest willingness to pay. 
C)  earn zero economic profits. 
D)  face more competition when fixed costs are high.

Question 8

The market for network goods:
I. is dominated by a single monopolist.
II. is dominated by a series of monopolies.
III. ensures long-term profits for those companies that win the standard war.

Accepted Answer

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

Question 9

Market contestability hurts the average consumer.

Accepted Answer

A) True 
 B)False

Question 10

Which is NOT a good example of a contestable market?

Accepted Answer

A)  low-cost airlines 
B)  electricity providers 
C)  a local Mexican restaurant 
D)  bottled-water manufacturers 
A)  low-cost airlines 
B)  electricity providers 
C)  a local Mexican restaurant 
D)  bottled-water manufacturers

Question 11

If a product for a network good is slightly better than another, the nature of network goods will ensure that only the slightly better product will be around.

Accepted Answer

A) True 
 B)False

Question 12

A fax machine is a network good because it becomes more useful when greater numbers of people have them.

Accepted Answer

A) True 
 B)False

Question 13

Table: Cell Service
 
a. What is(are) the Nash equilibrium(s) in this coordination game?
b. Which equilibrium will Mr. Brooks and Ms. Gertrude end up at? Explain your answer.
c. Does the coordination game get easier or harder if there are 100 friends instead of just 2? Explain.
Refer to the table. Mr. Brooks and Ms. Gertrude are good friends who like to talk on the phone. Each is deciding on a cell phone service to sign on with, where each service offers free unlimited calls to other customers who subscribe to the same service. The payoff table shows the rewards to Mr. Brooks and Ms. Gertrude from choosing either cell service A or B.

Accepted Answer

a. There are two Nash equilibriums—(A, A

Question 14

The online photo-sharing Web site Shutterfly offers unlimited free uploads. Which of the following best explains why they offer this service at no charge?

Accepted Answer

A)  Shutterfly is trying to increase switching costs for their consumers. 
B)  Shutterfly is trying to decrease their average costs. 
C)  Shutterfly is trying to increase competition. 
D)  The marginal cost of uploading photos is near zero; setting price equal to marginal cost is simply an efficient pricing strategy. 
A)  Shutterfly is trying to increase switching costs for their consumers. 
B)  Shutterfly is trying to decrease their average costs. 
C)  Shutterfly is trying to increase competition. 
D)  The marginal cost of uploading photos is near zero; setting price equal to marginal cost is simply an efficient pricing strategy.

Question 15

A network good is:

Accepted Answer

A)  a broadcast show on radio or television. 
B)  a good that must be bought in large quantities in order to get discounted prices. 
C)  a good supplied by a large network of competitive firms. 
D)  a good whose value increases to consumers as more consumers use the good. 
A)  a broadcast show on radio or television. 
B)  a good that must be bought in large quantities in order to get discounted prices. 
C)  a good supplied by a large network of competitive firms. 
D)  a good whose value increases to consumers as more consumers use the good.

Question 16

In 2011, Google introduced its social networking site, Google+. Even though Google+ is cleaner and more straightforward than its nearest competitor, Facebook, it still has trouble competing with Facebook because:

Accepted Answer

A)  most people don't know about it. 
B)  Facebook has a monopoly on social networking. 
C)  everyone's already on Facebook. 
D)  the market is still contestable. 
A)  most people don't know about it. 
B)  Facebook has a monopoly on social networking. 
C)  everyone's already on Facebook. 
D)  the market is still contestable.

Question 17

A single, stable monopolist typically dominates the market for network goods.

Accepted Answer

A) True 
 B)False

Question 18

Many local coffee and sandwich shops try to maintain their customer base and attract new customers by offering "Buy 10, Get 1 Free" or similar type discounts. Do you think that these types of programs raise or lower prices for consumers? Discuss why.

Accepted Answer

These types of loyalty rewards programs

Question 19

As a result of the Department of Justice's lawsuit against Microsoft:

Accepted Answer

A)  it was deemed that Microsoft is a Natural Monopoly. 
B)  Microsoft had an "intent to monopolize." 
C)  Microsoft's behavior made consumers worse off. 
D)  Microsoft does not need to share their knowledge and technologies to produce software. 
A)  it was deemed that Microsoft is a Natural Monopoly. 
B)  Microsoft had an "intent to monopolize." 
C)  Microsoft's behavior made consumers worse off. 
D)  Microsoft does not need to share their knowledge and technologies to produce software.

Question 20

A ______ equilibrium is a situation in which no player in the game has an incentive to change his or her strategy unilaterally.

Accepted Answer

A)  Selten 
B)  Nash 
C)  local 
D)  game 
A)  Selten 
B)  Nash 
C)  local 
D)  game

Exam 16: Competing for Monopoly

Social networking sites are network goods, so the benefits of using them diminish as they become more popular.

Describe the features of markets for network goods.

If music is a network good, then the "best" musicians:

Network goods are usually sold by monopolies or oligopolies because:

Which is NOT a good example of a network good?

Which of the following explains how Facebook limits contestability in social networks?

Firms that operate in contestable markets:

The market for network goods: I. is dominated by a single monopolist. II. is dominated by a series of monopolies. III. ensures long-term profits for those companies that win the standard war.

Market contestability hurts the average consumer.

Which is NOT a good example of a contestable market?

If a product for a network good is slightly better than another, the nature of network goods will ensure that only the slightly better product will be around.

A fax machine is a network good because it becomes more useful when greater numbers of people have them.

The online photo-sharing Web site Shutterfly offers unlimited free uploads. Which of the following best explains why they offer this service at no charge?

A network good is:

In 2011, Google introduced its social networking site, Google+. Even though Google+ is cleaner and more straightforward than its nearest competitor, Facebook, it still has trouble competing with Facebook because:

A single, stable monopolist typically dominates the market for network goods.

Many local coffee and sandwich shops try to maintain their customer base and attract new customers by offering "Buy 10, Get 1 Free" or similar type discounts. Do you think that these types of programs raise or lower prices for consumers? Discuss why.

As a result of the Department of Justice's lawsuit against Microsoft:

A ______ equilibrium is a situation in which no player in the game has an incentive to change his or her strategy unilaterally.

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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