Question 1

How does a network externality differ from a traditional positive externality?

Accepted Answer

A)  The person creating a network externality gains from the external benefit generated. 
B)  The person creating a traditional positive externality gains from the external benefit. 
C)  The external benefit from a network externality does not increase the value of the network. 
D)  The external benefit from a traditional positive externality generates even more demand for the good. 
A)  The person creating a network externality gains from the external benefit generated. 
B)  The person creating a traditional positive externality gains from the external benefit. 
C)  The external benefit from a network externality does not increase the value of the network. 
D)  The external benefit from a traditional positive externality generates even more demand for the good.

Question 2

For someone to cancel cable service, the cable company requires customers to either stand in line to return their modem boxes or pay for the cost of the device. This is an example of

Accepted Answer

A)  a teaser strategy. 
B)  a switching cost. 
C)  bundling. 
D)  intertemporal pricing. 
A)  a teaser strategy. 
B)  a switching cost. 
C)  bundling. 
D)  intertemporal pricing.

Question 3

What is likely to happen in the market for a network good when a new substitute product quickly gains popularity?

Accepted Answer

A)  The tipping point moves to a smaller number of customers. 
B)  The cost curves for both firms shift upward. 
C)  The core users will remain loyal to the firm. 
D)  The market for the network good may enter a vicious cycle. 
A)  The tipping point moves to a smaller number of customers. 
B)  The cost curves for both firms shift upward. 
C)  The core users will remain loyal to the firm. 
D)  The market for the network good may enter a vicious cycle.

Question 4

Which of these is NOT an example of a bundling strategy used to promote network goods?

Accepted Answer

A)  a prepaid wireless service that includes a Samsung phone 
B)  Amazon Prime service that comes with free limited movie streaming 
C)  a new laptop that comes with software preinstalled 
D)  a music royalty fee that is added to monthly subscription fees for satellite radio 
A)  a prepaid wireless service that includes a Samsung phone 
B)  Amazon Prime service that comes with free limited movie streaming 
C)  a new laptop that comes with software preinstalled 
D)  a music royalty fee that is added to monthly subscription fees for satellite radio

Question 5

Which statement describes a basic difference between a teaser strategy and a lock-in strategy?

Accepted Answer

A)  Lock-in strategies strive to lower prices, while teaser strategies threaten to raise prices. 
B)  Teaser strategies offer different models of the product, while lock-in strategies keep customers in the store until a contract has been signed. 
C)  Lock-in strategies try to keep current customers, while teaser strategies aim to gain new customers. 
D)  Teaser strategies are associated with the timing of a purchase, while lock-in strategies are associated with bundling of related products. 
A)  Lock-in strategies strive to lower prices, while teaser strategies threaten to raise prices. 
B)  Teaser strategies offer different models of the product, while lock-in strategies keep customers in the store until a contract has been signed. 
C)  Lock-in strategies try to keep current customers, while teaser strategies aim to gain new customers. 
D)  Teaser strategies are associated with the timing of a purchase, while lock-in strategies are associated with bundling of related products.

Question 6

A hotel room at a ski resort might be priced at $319 per night during the months of December to March but at $199 per night the rest of the year. This type of pricing is called

Accepted Answer

A)  teaser pricing. 
B)  bundling. 
C)  peak-load pricing. 
D)  lock-in pricing. 
A)  teaser pricing. 
B)  bundling. 
C)  peak-load pricing. 
D)  lock-in pricing.

Question 7

(Figure: Peak-Load Pricing Model) The graph represents the market for a good that follows a peak-load pricing model. Which curve represents marginal cost?

Accepted Answer

A)  M 
B)  N 
C)  O 
D)  R 
A)  M 
B)  N 
C)  O 
D)  R

Question 8

What is the difference between a virtual network and a social network?

Accepted Answer

Social networks can use physic

Question 9

Home Internet services are often sold with a free wireless modem if a customer signs a 12- month contract. 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

(Figure: Externalities and Network Effects) Based on the graph, if a consumer leaves the social network depicted, DP shifts right and DS shifts right.

Accepted Answer

A) True 
 B)False

Question 11

A network good is one where the _____ number of other users of the good.

Accepted Answer

A)  cost to the user rises if there is a large 
B)  benefit to the user falls if there is a large 
C)  cost to the user falls if there is a small 
D)  benefit to the user rises if there is a large 
A)  cost to the user rises if there is a large 
B)  benefit to the user falls if there is a large 
C)  cost to the user falls if there is a small 
D)  benefit to the user rises if there is a large

Question 12

Explain what a virtuous cycle is and when it will occur.

Accepted Answer

A virtuous cycle is the point at which a

Question 13

(Figure: Market for a Network Good 2) The graph depicts a market for a network good. If demand fails to reach point G, the company may lose market share.

Accepted Answer

A) True 
 B)False

Question 14

During the upward sloping part of a network good demand curve, which type of customer is likely to drive the sale of the good?

Accepted Answer

A)  core user 
B)  casual user 
C)  late adapter 
D)  market leader 
A)  core user 
B)  casual user 
C)  late adapter 
D)  market leader

Question 15

Facebook experienced a _____ cycle when a large increase in subscribers made the network more appealing, encouraging even more members to join the network.

Accepted Answer

A)  virtuous 
B)  social 
C)  growth 
D)  vicious 
A)  virtuous 
B)  social 
C)  growth 
D)  vicious

Question 16

(Figure: Market for a Network Good 2) The graph depicts a market for a network good. Point F represents the tipping point.

Accepted Answer

A) True 
 B)False

Question 17

Core users of a network good appear to the _____ of the network demand curve peak, and casual users appear to the _____ of the peak.

Accepted Answer

A)  left; right 
B)  right; left 
C)  left; left 
D)  right; right 
A)  left; right 
B)  right; left 
C)  left; left 
D)  right; right

Question 18

A firm "owns" a network when it becomes

Accepted Answer

A)  interconnected. 
B)  the industry standard. 
C)  compatible. 
D)  cost-effective. 
A)  interconnected. 
B)  the industry standard. 
C)  compatible. 
D)  cost-effective.

Question 19

Which of these would be categorized as a physical network?

Accepted Answer

A)  a Gmail account that nearly everyone has 
B)  Delta Airlines flight routes around the country 
C)  LinkedIn network connecting employers with potential employees 
D)  an Instagram account that people use to share photos 
A)  a Gmail account that nearly everyone has 
B)  Delta Airlines flight routes around the country 
C)  LinkedIn network connecting employers with potential employees 
D)  an Instagram account that people use to share photos

Question 20

A common format that is used in televisions, digital recorders, and software programs is known as a(n)

Accepted Answer

A)  interconnection. 
B)  versioning. 
C)  essential facility. 
D)  industry standard. 
A)  interconnection. 
B)  versioning. 
C)  essential facility. 
D)  industry standard.

How does a network externality differ from a traditional positive externality?

For someone to cancel cable service, the cable company requires customers to either stand in line to return their modem boxes or pay for the cost of the device. This is an example of

What is likely to happen in the market for a network good when a new substitute product quickly gains popularity?

Which of these is NOT an example of a bundling strategy used to promote network goods?

Which statement describes a basic difference between a teaser strategy and a lock-in strategy?

A hotel room at a ski resort might be priced at $319 per night during the months of December to March but at $199 per night the rest of the year. This type of pricing is called

(Figure: Peak-Load Pricing Model) The graph represents the market for a good that follows a peak-load pricing model. Which curve represents marginal cost?

What is the difference between a virtual network and a social network?

Home Internet services are often sold with a free wireless modem if a customer signs a 12- month contract. This is BEST described as an example of

(Figure: Externalities and Network Effects) Based on the graph, if a consumer leaves the social network depicted, D_P shifts right and D_S shifts right.

A network good is one where the _____ number of other users of the good.

Explain what a virtuous cycle is and when it will occur.

(Figure: Market for a Network Good 2) The graph depicts a market for a network good. If demand fails to reach point G, the company may lose market share.

During the upward sloping part of a network good demand curve, which type of customer is likely to drive the sale of the good?

Facebook experienced a _____ cycle when a large increase in subscribers made the network more appealing, encouraging even more members to join the network.

(Figure: Market for a Network Good 2) The graph depicts a market for a network good. Point F represents the tipping point.

Core users of a network good appear to the _ of the network demand curve peak, and casual users appear to the _ of the peak.

A firm "owns" a network when it becomes

Which of these would be categorized as a physical network?

A common format that is used in televisions, digital recorders, and software programs is known as a(n)

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Exam 14: Network Goods

How does a network externality differ from a traditional positive externality?

For someone to cancel cable service, the cable company requires customers to either stand in line to return their modem boxes or pay for the cost of the device. This is an example of

What is likely to happen in the market for a network good when a new substitute product quickly gains popularity?

Which of these is NOT an example of a bundling strategy used to promote network goods?

Which statement describes a basic difference between a teaser strategy and a lock-in strategy?

A hotel room at a ski resort might be priced at $319 per night during the months of December to March but at $199 per night the rest of the year. This type of pricing is called

(Figure: Peak-Load Pricing Model) The graph represents the market for a good that follows a peak-load pricing model. Which curve represents marginal cost?

What is the difference between a virtual network and a social network?

Home Internet services are often sold with a free wireless modem if a customer signs a 12- month contract. This is BEST described as an example of

(Figure: Externalities and Network Effects) Based on the graph, if a consumer leaves the social network depicted, DP shifts right and DS shifts right.

A network good is one where the _____ number of other users of the good.

Explain what a virtuous cycle is and when it will occur.

(Figure: Market for a Network Good 2) The graph depicts a market for a network good. If demand fails to reach point G, the company may lose market share.

During the upward sloping part of a network good demand curve, which type of customer is likely to drive the sale of the good?

Facebook experienced a _____ cycle when a large increase in subscribers made the network more appealing, encouraging even more members to join the network.

(Figure: Market for a Network Good 2) The graph depicts a market for a network good. Point F represents the tipping point.

Core users of a network good appear to the _____ of the network demand curve peak, and casual users appear to the _____ of the peak.

A firm "owns" a network when it becomes

Which of these would be categorized as a physical network?

A common format that is used in televisions, digital recorders, and software programs is known as a(n)

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

(Figure: Externalities and Network Effects) Based on the graph, if a consumer leaves the social network depicted, D_P shifts right and D_S shifts right.

Core users of a network good appear to the _ of the network demand curve peak, and casual users appear to the _ of the peak.