Question 1

Which is the best example of a network good?

Accepted Answer

A)  social media sites 
B)  laptop computers 
C)  automobiles 
D)  cable television 
A)  social media sites 
B)  laptop computers 
C)  automobiles 
D)  cable television

Question 2

When the market for a network good is contestable,:

Accepted Answer

A)  there is little competition. 
B)  many firms operate and compete for consumers in the industry. 
C)  it is hard for consumers to get locked into a "bad" outcome. 
D)  monopoly firms always charge prices well above their average costs. 
A)  there is little competition. 
B)  many firms operate and compete for consumers in the industry. 
C)  it is hard for consumers to get locked into a "bad" outcome. 
D)  monopoly firms always charge prices well above their average costs.

Question 3

An experiment by ______ showed music to be a network good.

Accepted Answer

A)  Duncan J. Watts 
B)  Michael Duncan 
C)  Buster Douglas 
D)  Michael Kremer 
A)  Duncan J. Watts 
B)  Michael Duncan 
C)  Buster Douglas 
D)  Michael Kremer

Question 4

Table: Jim, Dan Payoff Table
 
Refer to the table. Which of the following outcomes is NOT a Nash equilibrium?
I. (12, 12)
II. (4, 4)
III. (8, 8)
IV. (3, 3)

Accepted Answer

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

Question 5

Telephones are a good example of a network good.

Accepted Answer

A) True 
 B)False

Question 6

Apple encourages customers to buy an iPad and not switch to another tablet by:

Accepted Answer

A)  making it easy to download music, videos, TV shows, and other forms of media content. 
B)  making it difficult to export materials to another system. 
C)  increasing the costs of switching to a competitor's product line. 
D)  All of the answers are correct. 
A)  making it easy to download music, videos, TV shows, and other forms of media content. 
B)  making it difficult to export materials to another system. 
C)  increasing the costs of switching to a competitor's product line. 
D)  All of the answers are correct.

Question 7

Which statement is TRUE?

Accepted Answer

A)  Network goods rarely ever face new competition. 
B)  Network goods are usually sold by monopolistically competitive firms. 
C)  Network goods might lose their dominance over time. 
D)  Companies producing network goods compete "in the market," not "for the market." 
A)  Network goods rarely ever face new competition. 
B)  Network goods are usually sold by monopolistically competitive firms. 
C)  Network goods might lose their dominance over time. 
D)  Companies producing network goods compete "in the market," not "for the market."

Question 8

Frequent flyer programs 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 9

In the market for network goods, the best product always wins.

Accepted Answer

A) True 
 B)False

Question 10

Suppose you decide to stop using Internet Explorer and switch to Google Chrome. Why will Chrome immediately ask you if you wish to import your saved bookmarks from IE?

Accepted Answer

A)  It increases switching costs. 
B)  It helps maintain contestability in the browser market. 
C)  Google has the slogan "Don't be evil." 
D)  Allowing the importation of bookmarks is the Nash equilibrium. 
A)  It increases switching costs. 
B)  It helps maintain contestability in the browser market. 
C)  Google has the slogan "Don't be evil." 
D)  Allowing the importation of bookmarks is the Nash equilibrium.

Question 11

A Nash equilibrium occurs when no player in the game has an incentive to change his or her strategy unilaterally.

Accepted Answer

A) True 
 B)False

Question 12

The story of John Nash was captured in the movie A Beautiful Mind. The movie attempts to explain the Nash equilibrium with one striking blond woman and several brunettes at a bar. In the scene, all the men prefer the blonde. But Nash realizes, "If we all go for the blonde, we block each other. Not a single one of us is going to get her. So then we go for her friends. But they will give us the cold shoulder because no one likes being second choice. But what if no one goes for the blonde? We don't get in each other's way, and we don't insult the other girls. That's the only way we win." The scene ends with all the guys dancing with the brunettes while the blonde sits alone. Why is this NOT a Nash equilibrium?

Accepted Answer

A)  Any one man will be better off switching to the blonde. 
B)  Two men would be better off if they coordinated to the same woman. 
C)  There is a high switching cost to pursue the blonde. 
D)  Women will respect the men more if they compete for their affection. 
A)  Any one man will be better off switching to the blonde. 
B)  Two men would be better off if they coordinated to the same woman. 
C)  There is a high switching cost to pursue the blonde. 
D)  Women will respect the men more if they compete for their affection.

Question 13

When the market for a network good is contestable, then:

Accepted Answer

A)  there is little competition. 
B)  many firms operate and compete for consumers in the industry. 
C)  it is hard for consumers to get locked into a bad outcome. 
D)  monopoly firms always charge prices well above their average costs. 
A)  there is little competition. 
B)  many firms operate and compete for consumers in the industry. 
C)  it is hard for consumers to get locked into a bad outcome. 
D)  monopoly firms always charge prices well above their average costs.

Question 14

After you have been in a job for a while, you should portray your switching costs as:

Accepted Answer

A)  high because the firm will think that they do not need to pay you much. 
B)  high because then they can ask you to manage the most unpleasant responsibilities. 
C)  low so they can begin to interview for your replacement. 
D)  low so the firm will think that they need to pay you more to prevent you from leaving. 
A)  high because the firm will think that they do not need to pay you much. 
B)  high because then they can ask you to manage the most unpleasant responsibilities. 
C)  low so they can begin to interview for your replacement. 
D)  low so the firm will think that they need to pay you more to prevent you from leaving.

Question 15

Duncan J. Watts' research suggested that:

Accepted Answer

A)  the best music is also the most popular music. 
B)  people base their musical preferences on what other people think. 
C)  people are biased against free downloaded music. 
D)  QWERTY was inferior to Dvorak. 
A)  the best music is also the most popular music. 
B)  people base their musical preferences on what other people think. 
C)  people are biased against free downloaded music. 
D)  QWERTY was inferior to Dvorak.

Question 16

A Nash equilibrium in game theory is defined as a situation in which:

Accepted Answer

A)  no player has an incentive to change his or her strategy even when other players change. 
B)  no player has an incentive to change his or her strategy unilaterally. 
C)  any player has an incentive to change his or her strategy until he or she reaches the optimum. 
D)  any player has an incentive to change his or her strategy even when other players remain unchanged. 
A)  no player has an incentive to change his or her strategy even when other players change. 
B)  no player has an incentive to change his or her strategy unilaterally. 
C)  any player has an incentive to change his or her strategy until he or she reaches the optimum. 
D)  any player has an incentive to change his or her strategy even when other players remain unchanged.

Question 17

Microsoft software is considered a network good because it is:

Accepted Answer

A)  free to use. 
B)  the best product. 
C)  most likely to be compatible with other products and other readers, writers, and publishers. 
D)  All of the answers are correct. 
A)  free to use. 
B)  the best product. 
C)  most likely to be compatible with other products and other readers, writers, and publishers. 
D)  All of the answers are correct.

Question 18

A network good is a good whose value to one consumer:

Accepted Answer

A)  increases the network of the consumer. 
B)  increases some, but decreases in value as other consumers use the good. 
C)  also creates the same value to other consumers as they use the good. 
D)  increases the more that other consumers use the good. 
A)  increases the network of the consumer. 
B)  increases some, but decreases in value as other consumers use the good. 
C)  also creates the same value to other consumers as they use the good. 
D)  increases the more that other consumers use the good.

Question 19

Which statement is TRUE?

Accepted Answer

A)  Network goods are sold mostly in price-taker markets. 
B)  The network good is always the "best" good. 
C)  Monopolies may sell network goods. 
D)  All of these statements are true. 
A)  Network goods are sold mostly in price-taker markets. 
B)  The network good is always the "best" good. 
C)  Monopolies may sell network goods. 
D)  All of these statements are true.

Question 20

A network good's:

Accepted Answer

A)  consumption increases as income decreases. 
B)  value to one consumer increases the more that other consumers use the good. 
C)  allure derives from its low fixed costs and high marginal costs. 
D)  existence is made possible by the Internet. 
A)  consumption increases as income decreases. 
B)  value to one consumer increases the more that other consumers use the good. 
C)  allure derives from its low fixed costs and high marginal costs. 
D)  existence is made possible by the Internet.

Exam 16: Competing for Monopoly

Which is the best example of a network good?

When the market for a network good is contestable,:

An experiment by ______ showed music to be a network good.

Table: Jim, Dan Payoff Table Refer to the table. Which of the following outcomes is NOT a Nash equilibrium? I. (12, 12) II. (4, 4) III. (8, 8) IV. (3, 3)

Telephones are a good example of a network good.

Apple encourages customers to buy an iPad and not switch to another tablet by:

Which statement is TRUE?

Frequent flyer programs are often designed to:

In the market for network goods, the best product always wins.

Suppose you decide to stop using Internet Explorer and switch to Google Chrome. Why will Chrome immediately ask you if you wish to import your saved bookmarks from IE?

A Nash equilibrium occurs when no player in the game has an incentive to change his or her strategy unilaterally.

When the market for a network good is contestable, then:

After you have been in a job for a while, you should portray your switching costs as:

Duncan J. Watts' research suggested that:

A Nash equilibrium in game theory is defined as a situation in which:

Microsoft software is considered a network good because it is:

A network good is a good whose value to one consumer:

Which statement is TRUE?

A network good's:

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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