Question 1

Movies are typically shown in theaters for only several months before they are released on online streaming sites at a lower price. This is an example of

Accepted Answer

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

Question 2

The main difference between a network demand curve and a traditional demand curve is that a

Accepted Answer

A)  traditional demand curve can slope upward indefinitely. 
B)  network demand curve has an upward slope at lower levels of output. 
C)  network demand curve has an upward slope at higher levels of output. 
D)  network demand curve is always either vertical or horizontal. 
A)  traditional demand curve can slope upward indefinitely. 
B)  network demand curve has an upward slope at lower levels of output. 
C)  network demand curve has an upward slope at higher levels of output. 
D)  network demand curve is always either vertical or horizontal.

Question 3

(Figure: Market for a Network Good 2) The graph depicts the market for a network good. What point must demand reach for a virtuous cycle to take place?

Accepted Answer

A)  E 
B)  F 
C)  G 
D)  H 
A)  E 
B)  F 
C)  G 
D)  H

Question 4

The train wheel gauge (the distance between rails on a train track) is different in Mongolia than in Russia. When a train travels from one country into the other, the wheels on each train car must be changed at the border to allow the train to fit onto the track across the border in the other country. This situation indicates that

Accepted Answer

A)  interconnection of essential facilities is immediate and automatic. 
B)  essential facilities are common, but interconnection is possible only at a great cost. 
C)  interconnection of essential facilities is possible across the railway networks, but only with some inefficiency. 
D)  interconnection of essential facilities is not possible with the technologies used. 
A)  interconnection of essential facilities is immediate and automatic. 
B)  essential facilities are common, but interconnection is possible only at a great cost. 
C)  interconnection of essential facilities is possible across the railway networks, but only with some inefficiency. 
D)  interconnection of essential facilities is not possible with the technologies used.

Question 5

What is a network good? Give an example of a network good.

Accepted Answer

A network good is a good or service that

Question 6

An industry standard is a common format that is used by multiple firms.

Accepted Answer

A) True 
 B)False

Question 7

The phone company AT&T was broken up in 1984 because it controlled more than three-fourths of the U.S. telephone network.

Accepted Answer

A) True 
 B)False

Question 8

Can bad regulation be worse than no regulation?

Accepted Answer

Regulation entails both costs

Question 9

Suppose your bank opens up a dozen more branches throughout the city, making it much easier to find an ATM. What happens to the demand and supply curves for this network as it expands?

Accepted Answer

A)  Demand and supply both shift left. 
B)  Demand and supply both shift right. 
C)  Demand shifts right and supply shifts left. 
D)  Demand shifts left and supply shifts right. 
A)  Demand and supply both shift left. 
B)  Demand and supply both shift right. 
C)  Demand shifts right and supply shifts left. 
D)  Demand shifts left and supply shifts right.

Question 10

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

Accepted Answer

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

Question 11

A network that combines elements of physical and virtual networks, and describes groups of people using the same product or service who are also connected more directly within the network is a _____ network.

Accepted Answer

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

Question 12

A network good is one of which the cost to the user falls if there is a large number of other users of the good.

Accepted Answer

A) True 
 B)False

Question 13

The external benefit of an additional subscriber to a network is shown as the horizontal distance between the private demand curve and the social demand curve.

Accepted Answer

A) True 
 B)False

Question 14

The purpose of regulatory policy is to

Accepted Answer

A)  maximize the number of firms in an industry. 
B)  promote more consumer choices and lower prices. 
C)  ensure that the most efficient industry standard is maintained in an industry. 
D)  ensure that firms earn an acceptable, but not excessive, rate of profit. 
A)  maximize the number of firms in an industry. 
B)  promote more consumer choices and lower prices. 
C)  ensure that the most efficient industry standard is maintained in an industry. 
D)  ensure that firms earn an acceptable, but not excessive, rate of profit.

Question 15

Getcha-There-In-One-Piece Airline charges higher ticket prices for popular mid-morning departures and lower ticket prices for less popular late-night departures. Getcha-There-In-One-Piece Airlines is engaging in

Accepted Answer

A)  product differentiation. 
B)  peak-load pricing. 
C)  intertemporal pricing. 
D)  bundling. 
A)  product differentiation. 
B)  peak-load pricing. 
C)  intertemporal pricing. 
D)  bundling.

Question 16

The benefit added by the 50,000th user in a new network is _____ than the benefit added by 50,000,000th user, due to _____ returns to the network externality.

Accepted Answer

A)  larger; increasing 
B)  larger; diminishing 
C)  smaller; increasing 
D)  smaller; diminishing 
A)  larger; increasing 
B)  larger; diminishing 
C)  smaller; increasing 
D)  smaller; diminishing

Question 17

Network externalities benefit all

Accepted Answer

A)  users and all potential users. 
B)  users, except for the user generating the network effect, and all potential users. 
C)  users, except for the user generating the network effect. 
D)  potential users. 
A)  users and all potential users. 
B)  users, except for the user generating the network effect, and all potential users. 
C)  users, except for the user generating the network effect. 
D)  potential users.

Question 18

Why are marginal costs typically low for a network good?

Accepted Answer

A)  Fixed costs are high and variable costs are low. 
B)  Variable costs are high and fixed costs are low. 
C)  Total costs rise faster than variable costs as output increases. 
D)  The demand curve is upward sloping at low output levels. 
A)  Fixed costs are high and variable costs are low. 
B)  Variable costs are high and fixed costs are low. 
C)  Total costs rise faster than variable costs as output increases. 
D)  The demand curve is upward sloping at low output levels.

Question 19

Airlines often offer "points," which are earned by flying on the airline and can be used for various rewards. 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 20

A strategy that allows firms to capture customers who buy related products by making it more attractive for those people to use that firm's products is

Accepted Answer

A)  product differentiation. 
B)  versioning. 
C)  a lock-in strategy. 
D)  bundling. 
A)  product differentiation. 
B)  versioning. 
C)  a lock-in strategy. 
D)  bundling.

Movies are typically shown in theaters for only several months before they are released on online streaming sites at a lower price. This is an example of

The main difference between a network demand curve and a traditional demand curve is that a

(Figure: Market for a Network Good 2) The graph depicts the market for a network good. What point must demand reach for a virtuous cycle to take place?

What is a network good? Give an example of a network good.

An industry standard is a common format that is used by multiple firms.

The phone company AT&T was broken up in 1984 because it controlled more than three-fourths of the U.S. telephone network.

Can bad regulation be worse than no regulation?

Suppose your bank opens up a dozen more branches throughout the city, making it much easier to find an ATM. What happens to the demand and supply curves for this network as it expands?

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

A network that combines elements of physical and virtual networks, and describes groups of people using the same product or service who are also connected more directly within the network is a _____ network.

A network good is one of which the cost to the user falls if there is a large number of other users of the good.

The external benefit of an additional subscriber to a network is shown as the horizontal distance between the private demand curve and the social demand curve.

The purpose of regulatory policy is to

Getcha-There-In-One-Piece Airline charges higher ticket prices for popular mid-morning departures and lower ticket prices for less popular late-night departures. Getcha-There-In-One-Piece Airlines is engaging in

The benefit added by the 50,000th user in a new network is _ than the benefit added by 50,000,000th user, due to _ returns to the network externality.

Network externalities benefit all

Why are marginal costs typically low for a network good?

Airlines often offer "points," which are earned by flying on the airline and can be used for various rewards. This is BEST described as an example of

A strategy that allows firms to capture customers who buy related products by making it more attractive for those people to use that firm's products is

Exploring Economics

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Exam 14: Network Goods

Movies are typically shown in theaters for only several months before they are released on online streaming sites at a lower price. This is an example of

The main difference between a network demand curve and a traditional demand curve is that a

(Figure: Market for a Network Good 2) The graph depicts the market for a network good. What point must demand reach for a virtuous cycle to take place?

What is a network good? Give an example of a network good.

An industry standard is a common format that is used by multiple firms.

The phone company AT&T was broken up in 1984 because it controlled more than three-fourths of the U.S. telephone network.

Can bad regulation be worse than no regulation?

Suppose your bank opens up a dozen more branches throughout the city, making it much easier to find an ATM. What happens to the demand and supply curves for this network as it expands?

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

A network that combines elements of physical and virtual networks, and describes groups of people using the same product or service who are also connected more directly within the network is a _____ network.

A network good is one of which the cost to the user falls if there is a large number of other users of the good.

The external benefit of an additional subscriber to a network is shown as the horizontal distance between the private demand curve and the social demand curve.

The purpose of regulatory policy is to

Getcha-There-In-One-Piece Airline charges higher ticket prices for popular mid-morning departures and lower ticket prices for less popular late-night departures. Getcha-There-In-One-Piece Airlines is engaging in

The benefit added by the 50,000th user in a new network is _____ than the benefit added by 50,000,000th user, due to _____ returns to the network externality.

Network externalities benefit all

Why are marginal costs typically low for a network good?

Airlines often offer "points," which are earned by flying on the airline and can be used for various rewards. This is BEST described as an example of

A strategy that allows firms to capture customers who buy related products by making it more attractive for those people to use that firm's products is

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

The benefit added by the 50,000th user in a new network is _ than the benefit added by 50,000,000th user, due to _ returns to the network externality.