Question 1

An increase in supply leads to a decrease in price for a small network with a fixed capacity.

Accepted Answer

A) True 
 B)False

Question 2

Which of these is NOT one of the three main types of networks?

Accepted Answer

A)  physical 
B)  social 
C)  optical 
D)  virtual 
A)  physical 
B)  social 
C)  optical 
D)  virtual

Question 3

In the long run, interconnection in network industries leads to a lower level of competition and lower efficiency.

Accepted Answer

A) True 
 B)False

Question 4

A network connected by groups of people using the same type of good is a _____ network.

Accepted Answer

A)  physical 
B)  mental 
C)  social 
D)  virtual 
A)  physical 
B)  mental 
C)  social 
D)  virtual

Question 5

When the market for a network good matures, the demand curve

Accepted Answer

A)  has an upward slope. 
B)  is horizontal. 
C)  has a negative slope. 
D)  is vertical. 
A)  has an upward slope. 
B)  is horizontal. 
C)  has a negative slope. 
D)  is vertical.

Question 6

(Figure: Market Equilibrium for a Network Good) Based on the graph, the price effect dominates the network effect in segment

Accepted Answer

A)  ab. 
B)  bd. 
C)  ad. 
D)  de. 
A)  ab. 
B)  bd. 
C)  ad. 
D)  de.

Question 7

As the size of a network rises, network effects

Accepted Answer

A)  exhibit diminishing returns. 
B)  exhibit increasing returns. 
C)  lead to unchanging price elasticity of demand along a demand curve. 
D)  are associated with fixed rather than variable costs. 
A)  exhibit diminishing returns. 
B)  exhibit increasing returns. 
C)  lead to unchanging price elasticity of demand along a demand curve. 
D)  are associated with fixed rather than variable costs.

Question 8

Firms use teaser strategies to capture new customers and lock-in strategies to retain existing customers.

Accepted Answer

A) True 
 B)False

Question 9

Laptop computers are sometimes sold with a choice of graphics (for gaming) and processing (for spreadsheets). This is BEST described as an example of

Accepted Answer

A)  a lock-in strategy. 
B)  a teaser strategy. 
C)  intertemporal pricing. 
D)  versioning. 
A)  a lock-in strategy. 
B)  a teaser strategy. 
C)  intertemporal pricing. 
D)  versioning.

Question 10

The tipping point is the same as the equilibrium point in the market for network goods.

Accepted Answer

A) True 
 B)False

Question 11

The physical linking of a network to another network's essential facilities

Accepted Answer

A)  hinders competition by allowing firms to work together to set prices and/or output. 
B)  helps promote competition in situations in which firms are able to use their market power to block competitors from entering the industry. 
C)  hinders competition by encouraging the linked networks to limit competition from other networks. 
D)  helps promote competition through regulation of the linked firms' prices and output levels. 
A)  hinders competition by allowing firms to work together to set prices and/or output. 
B)  helps promote competition in situations in which firms are able to use their market power to block competitors from entering the industry. 
C)  hinders competition by encouraging the linked networks to limit competition from other networks. 
D)  helps promote competition through regulation of the linked firms' prices and output levels.

Question 12

What economic process causes a portion of a network good's demand curve to slope downward?

Accepted Answer

A)  a saturated market 
B)  lower production costs 
C)  the income effect 
D)  the substitution effect 
A)  a saturated market 
B)  lower production costs 
C)  the income effect 
D)  the substitution effect

Question 13

Interconnection promotes competition by ensuring that no firm has exclusive access to a set of customers.

Accepted Answer

A) True 
 B)False

Question 14

Network goods often involve high _____ costs, leading to _____ of scale in the production process.

Accepted Answer

A)  fixed; diseconomies 
B)  fixed; economies 
C)  variable; diseconomies 
D)  variable; economies 
A)  fixed; diseconomies 
B)  fixed; economies 
C)  variable; diseconomies 
D)  variable; economies

Question 15

Unlike positive externalities from physical goods, network externalities affect

Accepted Answer

A)  existing and potential users. 
B)  only potential users. 
C)  only existing users. 
D)  existing firms. 
A)  existing and potential users. 
B)  only potential users. 
C)  only existing users. 
D)  existing firms.

Question 16

If demand for a network good falls to the left of the tipping point, then it will lead to a vicious cycle.

Accepted Answer

A) True 
 B)False

Question 17

The model for a network demand curve assumes which of these?

Accepted Answer

A)  The short-run supply curve is positively sloped. 
B)  A new entrant can expand in small increments. 
C)  There is a short-run demand curve corresponding to each short-run supply curve. 
D)  Only one firm may enter the industry. 
A)  The short-run supply curve is positively sloped. 
B)  A new entrant can expand in small increments. 
C)  There is a short-run demand curve corresponding to each short-run supply curve. 
D)  Only one firm may enter the industry.

Question 18

Before a critical mass of consumers is reached, as more core users purchase a network good, its price increases.

Accepted Answer

A) True 
 B)False

Question 19

Two main types of cell phone networks (GSM and CDMA) are used in the world. CDMA is used primarily by Verizon and Sprint in the United States. GSM is used by AT&T and T-Mobile in the United States as well as in most of the rest of the world. This information indicates that

Accepted Answer

A)  there is an industry standard in the United States, but not in the rest of the world. 
B)  CDMA is the global industry standard for cell phone networks. 
C)  while there is an industry standard in many countries, there is not an industry standard in the United States. 
D)  GSM is the global industry standard. 
A)  there is an industry standard in the United States, but not in the rest of the world. 
B)  CDMA is the global industry standard for cell phone networks. 
C)  while there is an industry standard in many countries, there is not an industry standard in the United States. 
D)  GSM is the global industry standard.

Question 20

The downward-sloping segment of a network demand curve typically occurs once a network matures.

Accepted Answer

A) True 
 B)False

An increase in supply leads to a decrease in price for a small network with a fixed capacity.

Which of these is NOT one of the three main types of networks?

In the long run, interconnection in network industries leads to a lower level of competition and lower efficiency.

A network connected by groups of people using the same type of good is a _____ network.

When the market for a network good matures, the demand curve

(Figure: Market Equilibrium for a Network Good) Based on the graph, the price effect dominates the network effect in segment

As the size of a network rises, network effects

Firms use teaser strategies to capture new customers and lock-in strategies to retain existing customers.

Laptop computers are sometimes sold with a choice of graphics (for gaming) and processing (for spreadsheets). This is BEST described as an example of

The tipping point is the same as the equilibrium point in the market for network goods.

The physical linking of a network to another network's essential facilities

What economic process causes a portion of a network good's demand curve to slope downward?

Interconnection promotes competition by ensuring that no firm has exclusive access to a set of customers.

Network goods often involve high _ costs, leading to _ of scale in the production process.

Unlike positive externalities from physical goods, network externalities affect

If demand for a network good falls to the left of the tipping point, then it will lead to a vicious cycle.

The model for a network demand curve assumes which of these?

Before a critical mass of consumers is reached, as more core users purchase a network good, its price increases.

Two main types of cell phone networks (GSM and CDMA) are used in the world. CDMA is used primarily by Verizon and Sprint in the United States. GSM is used by AT&T and T-Mobile in the United States as well as in most of the rest of the world. This information indicates that

The downward-sloping segment of a network demand curve typically occurs once a network matures.

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Exam 14: Network Goods

An increase in supply leads to a decrease in price for a small network with a fixed capacity.

Which of these is NOT one of the three main types of networks?

In the long run, interconnection in network industries leads to a lower level of competition and lower efficiency.

A network connected by groups of people using the same type of good is a _____ network.

When the market for a network good matures, the demand curve

(Figure: Market Equilibrium for a Network Good) Based on the graph, the price effect dominates the network effect in segment

As the size of a network rises, network effects

Firms use teaser strategies to capture new customers and lock-in strategies to retain existing customers.

Laptop computers are sometimes sold with a choice of graphics (for gaming) and processing (for spreadsheets). This is BEST described as an example of

The tipping point is the same as the equilibrium point in the market for network goods.

The physical linking of a network to another network's essential facilities

What economic process causes a portion of a network good's demand curve to slope downward?

Interconnection promotes competition by ensuring that no firm has exclusive access to a set of customers.

Network goods often involve high _____ costs, leading to _____ of scale in the production process.

Unlike positive externalities from physical goods, network externalities affect

If demand for a network good falls to the left of the tipping point, then it will lead to a vicious cycle.

The model for a network demand curve assumes which of these?

Before a critical mass of consumers is reached, as more core users purchase a network good, its price increases.

Two main types of cell phone networks (GSM and CDMA) are used in the world. CDMA is used primarily by Verizon and Sprint in the United States. GSM is used by AT&T and T-Mobile in the United States as well as in most of the rest of the world. This information indicates that

The downward-sloping segment of a network demand curve typically occurs once a network matures.

Exploring Economics

Production, Economic Growth, and Trade

Supply and Demand

Markets and Government

Elasticity

Consumer Choice and Demand

Production and Costs

Perfect Competition

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

The Labor Market

Land, Capital Markets, and Innovation

Externalities and Public Goods

Poverty and Income Distribution

International Trade

Filters

Network goods often involve high _ costs, leading to _ of scale in the production process.