Exam 36:Information Technology-Part A

Professor Kremepuff has published a new textbook.This book will be used in classes for two years,at which time it will be replaced by a new edition.The publisher charges a price of $p₁ in the first year and $p₂ in the second year.After the first year,bookstores buy back copies from students for $p₂/2 and resell them to students in the second year for $p₂.(Students are indifferent between new and used copies. )The cost to a student in the first year of owning the book for a year is therefore $(p₁ -p₂/2).In the first year of publication,the number of students willing to pay $v to own the book for a year is 40,000-1,000v.The number of students taking the course in the first year who are willing to pay at least $w to keep the book for reference rather than resell it is 40,000 - 5,000w.In the second year,the number of students who have not previously taken the course and are willing to pay at least $p for a copy of the book is 30,000 - 1,000p.If the publisher sets a price of $p₁ in the first year and $p₂ in the second year,with p₁ B3 p₂,then the total number of copies that the publisher sells over two years will be equal to

Professor Kremepuff has published a new textbook.This book will be used in classes for two years,at which time it will be replaced by a new edition.The publisher charges a price of $p₁ in the first year and $p₂ in the second year.After the first year,bookstores buy back copies from students for $p₂/2 and resell them to students in the second year for $p₂.(Students are indifferent between new and used copies. )The cost to a student in the first year of owning the book for a year is therefore $(p₁ - p₂/2).In the first year of publication,the number of students willing to pay $v to own the book for a year is 60,000 -1,000v.The number of students taking the course in the first year who are willing to pay at least $w to keep the book for reference rather than resell it is 60,000 - 5,000w.In the second year,the number of students who have not previously taken the course and are willing to pay at least $p for a copy of the book is 50,000 - 1,000p.If the publisher sets a price of $p₁ in the first year and $p₂ in the second year,with p₁ B3 p₂,then the total number of copies that the publisher sells over two years will be equal to

If the probability that a firm is caught making illegal copies of software increases with the number of copies that the firm makes,then the larger the fine assessed for copying,the smaller will be the number of copies made by each software-copying firm.

If the demand curve for the DoorKnobs operating system is related to perceived market share s and actual market share t by the equation p = 144s(1 -x),then in the long run,the highest price at which DoorKnobs would maintain a market share of 4/6 would be

Video marketers and publishers are more likely to profit from allowing rentals of their products,the higher the ratio of cost of production of originals to the transaction cost of rentals.

Professor Kremepuff has published a new textbook.This book will be used in classes for two years,at which time it will be replaced by a new edition.The publisher charges a price of $p₁ in the first year and $p₂ in the second year.After the first year,bookstores buy back copies from students for $ p₂/2 and resell them to students in the second year for $p₂.(Students are indifferent between new and used copies. )The cost to a student in the first year of owning the book for a year is therefore $(p₁ - p₂/2).In the first year of publication,the number of students willing to pay $v to own the book for a year is 70,000- 1,000v.The number of students taking the course in the first year who are willing to pay at least $w to keep the book for reference rather than resell it is 70,000 -5,000w.In the second year,the number of students who have not previously taken the course and are willing to pay at least $p for a copy of the book is 60,000 - 1,000p.If the publisher sets a price of $p₁ in the first year and $p₂ in the second year,with p₁ B3 p₂,then the total number of copies that the publisher sells over two years will be equal to

Network externalities are a special kind of externality in which people care about the number of other people who consume the good.

List three examples of products for which there are significant network externalities.Explain why you believe network externalities are present in each case.

A group of 9 consumers are trying to decide whether to connect to a new communications network.Consumer 1 is of type 1,consumer 2 of type 2,consumer 3 of type 3,and so on.Each consumer's willingness to pay to belong to the network is proportional to the number of consumers who belong.Where k is the number of consumers who belong,the willingness to pay of a type n consumer is equal to k times n.What is the highest price at which 7 consumers could all connect to the network and either make a profit or at least break even?

For a good with network externalities,the number of people who are willing to buy a unit of the good is uniquely determined by the price.

Banks have started offering electronic bill pay for free.This decision can best be explained as

Intel produces the overwhelming majority of computer central processing units (CPUs)that run the Microsoft Windows operating system.Systems competition reasoning would suggest that Intel could only benefit from an outcome of the Microsoft antitrust case that is unfavorable to Microsoft.

For a good with network externalities,draw a diagram showing the relation between the number of units sold and the willingness to pay of demanders.Find a price at which there are two stable and one unstable equilibrium quantities.Label these equilibria and explain why the unstable equilibrium is unstable.

A group of 13 consumers are trying to decide whether to connect to a new communications network.Consumer 1 is of type 1,consumer 2 of type 2,consumer 3 of type 3,and so on.Each consumer's willingness to pay to belong to the network is proportional to the number of consumers who belong.Where k is the number of consumers who belong,the willingness to pay of a type n consumer is equal to k times n.What is the highest price at which 9 consumers could all connect to the network and either make a profit or at least break even?

A group of 9 consumers are trying to decide whether to connect to a new communications network.Consumer 1 is of type 1,consumer 2 of type 2,consumer 3 of type 3,and so on.Each consumer's willingness to pay to belong to the network is proportional to the number of consumers who belong.Where k is the number of consumers who belong,the willingness to pay of a type n consumer is equal to k times n.What is the highest price at which 7 consumers could all connect to the network and either make a profit or at least break even?

Our old friend Edmund Stench from Chapter 2 has now grown up and is in the business of producing punk rock DVDs.He must choose between selling his DVDs to final consumers,or selling his DVDs to firms that will rent them to the public.Which of the following factors would make rentals more attractive than sales?

If the demand curve for the DoorKnobs operating system is related to perceived market share s and actual market share t by the equation p =147s(1- x),then in the long run,the highest price at which DoorKnobs would maintain a market share of 4/7 would be

Copyright protection discourages the production of new software.

If the demand curve for the DoorKnobs operating system is related to perceived market share s and actual market share t by the equation p = 98s(1 - x),then in the long run,the highest price at which DoorKnobs would maintain a market share of 6/7 would be

Economic theory suggests that the existence of a used-book market lowers the profits of publishers below what they would be if every reader had to buy a new copy.