Question 1

Network externalities

Accepted Answer

A) may be positive. 
B) may be direct. 
C) may be indirect. 
D) all of the of the statements associated with this question are correct. 
A) may be positive. 
B) may be direct. 
C) may be indirect. 
D) all of the of the statements associated with this question are correct. D

Question 2

Consider a two-way network with 1,000 users.Adding one additional user to such a network benefits all users by adding

Accepted Answer

A) 999 potential connections to the network. 
B) 1,000 potential connections to the network. 
C) 2,000 potential connections to the network. 
D) 999,000 potential connections to the network. 
A) 999 potential connections to the network. 
B) 1,000 potential connections to the network. 
C) 2,000 potential connections to the network. 
D) 999,000 potential connections to the network. B

Question 3

Nodes are

Accepted Answer

A) examples of positive network externalities. 
B) examples of negative network externalities. 
C) different points in geographic or economic space linked by a network. 
D) none of the statements associated with this question are correct. 
A) examples of positive network externalities. 
B) examples of negative network externalities. 
C) different points in geographic or economic space linked by a network. 
D) none of the statements associated with this question are correct. C

Question 4

Firms that can effectively price discriminate will increase profitability when they engage in

Accepted Answer

A) predatory pricing. 
B) limit pricing. 
C) strategies that raises rivals' costs. 
D) any of the statements associated with this question are correct. 
A) predatory pricing. 
B) limit pricing. 
C) strategies that raises rivals' costs. 
D) any of the statements associated with this question are correct.

Question 5

Which of the following is false?

Accepted Answer

A) It is always more profitable to engage in limit pricing than to permit entry. 
B) Being the first-mover is always best. 
C) Engaging in predatory pricing is always more profitable than permitting existing firms to remain in the market. 
D) All of the statements associated with this question are false. 
A) It is always more profitable to engage in limit pricing than to permit entry. 
B) Being the first-mover is always best. 
C) Engaging in predatory pricing is always more profitable than permitting existing firms to remain in the market. 
D) All of the statements associated with this question are false.

Question 6

If one more user is added to a two-way network, it will generally

Accepted Answer

A) benefit the new user more than the existing users. 
B) benefit existing users more than the new user. 
C) provide equal benefits to existing users and the new user. 
D) unable to tell, because this analysis depends on the type of industry. 
A) benefit the new user more than the existing users. 
B) benefit existing users more than the new user. 
C) provide equal benefits to existing users and the new user. 
D) unable to tell, because this analysis depends on the type of industry.

Question 7

The price-cost squeeze is

Accepted Answer

A) a tactic used by a vertically integrated firm to raise rival's costs of inputs, while maintaining final product prices. 
B) a strategy where a firm temporarily prices below its marginal costs to drive competitors out of the market. 
C) when an incumbent maintains a price below the monopoly price in order to prevent entry. 
D) the act of charging a low price initially upon entering a market to gain market share. 
A) a tactic used by a vertically integrated firm to raise rival's costs of inputs, while maintaining final product prices. 
B) a strategy where a firm temporarily prices below its marginal costs to drive competitors out of the market. 
C) when an incumbent maintains a price below the monopoly price in order to prevent entry. 
D) the act of charging a low price initially upon entering a market to gain market share.

Question 8

SunCenter is the only firm in its industry.Currently, SunCenter charges $75 per unit, a price well in excess of its marginal cost of $5 per unit, and earns $70 million per year in profit.According to a trusted source, the manager of SunCenter learned that a new firm is contemplating entering the market.This would reduce its profit to $40 million per year.By expanding its output and lowering its price to $50, the entrant would find it unprofitable to enter the market and SunCenter would earn profits of $50 million per year for the indefinite future.
a.What pricing strategy is the manager of SunCenter considering?
b.If SunCenter was able to credibly commit to maintain a price of $50, would it be a profitable strategy? Explain.

Accepted Answer

a.Limit pricing.It is not predatory pric

Question 9

Predatory pricing is a strategy

Accepted Answer

A) where an incumbent maintains a price below the monopoly level to prevent entry by potential competitors. 
B) where a firm enjoys lower costs due to knowledge gained from its past production decisions. 
C) where a firm temporarily prices below its marginal cost to drive competitors out of the market. 
D) used by a vertically integrated firm to squeeze margins of its competitors. 
A) where an incumbent maintains a price below the monopoly level to prevent entry by potential competitors. 
B) where a firm enjoys lower costs due to knowledge gained from its past production decisions. 
C) where a firm temporarily prices below its marginal cost to drive competitors out of the market. 
D) used by a vertically integrated firm to squeeze margins of its competitors.

Question 10

Consider the following normal-form game.
B.
b."Bottom," since player A should anticipate that B will play its dominant strategy.
c.($500, -$50)
d.See the extensive form game is shown in Figure 13-1.Notice that if player B moves first, its best response is "Right." To see this, notice that if B plays "Left," A will play "Bottom" since $500 is better than $100.If B plays "Right," A's best response is "Top" since -$10 is better than -$100.Thus, player B earns a payoff of $100 by moving first and playing "Right," compared to the payoff of -$50 that is achieved if it does not exercise this first-mover advantage.
   Figure 13-1
e.Player B must be able to credibly commit to the strategy "Right" before player A has a chance to move.Furthermore, this choice must be known by A before it makes its own move.

Accepted Answer

@#IMG-DLM& a.What is player B's best strategy in a

Question 11

A two-way network that links users and the per-unit value of the service increases as the size of the network increases is a

Accepted Answer

A) positive externality known as an indirect network externality. 
B) negative externality known as an indirect network externality. 
C) positive externality known as an direct network externality. 
D) negative externality known as an direct network externality. 
A) positive externality known as an indirect network externality. 
B) negative externality known as an indirect network externality. 
C) positive externality known as an direct network externality. 
D) negative externality known as an direct network externality.

Question 12

A firm that engages in predatory pricing benefits from

Accepted Answer

A) having deeper pockets than its prey. 
B) building a reputation for taking tough actions to drive a competitor out of the market. 
C) having its prey stockpile its product. 
D) having deeper pockets than its prey and building a reputation for taking tough actions to drive a competitor out of the market. 
A) having deeper pockets than its prey. 
B) building a reputation for taking tough actions to drive a competitor out of the market. 
C) having its prey stockpile its product. 
D) having deeper pockets than its prey and building a reputation for taking tough actions to drive a competitor out of the market.

Question 13

Suppose the production game depicted in the above payoff matrix is a sequential-move game.Identify the strategy leading to a first-mover advantage for player 2.

Accepted Answer

A) Player 2 moves first and plays Low Q.Observing player 2's move player 1's best response is to play Low Q. 
B) Player 2 moves first and plays High Q.Observing player 2's move player 1's best response is to play Low Q. 
C) Player 1 moves first and plays Low Q.Observing player 1's move player 2's best response is to play High Q. 
D) Player 2 moves first and plays High Q.Observing player 2's move player 1's best response is to play High Q. 
A) Player 2 moves first and plays Low Q.Observing player 2's move player 1's best response is to play Low Q. 
B) Player 2 moves first and plays High Q.Observing player 2's move player 1's best response is to play Low Q. 
C) Player 1 moves first and plays Low Q.Observing player 1's move player 2's best response is to play High Q. 
D) Player 2 moves first and plays High Q.Observing player 2's move player 1's best response is to play High Q.

Question 14

Which of the following is not an example of a network?

Accepted Answer

A) Airlines. 
B) Trucking. 
C) Telecommunications. 
D) None of the statements associated with this question are correct. 
A) Airlines. 
B) Trucking. 
C) Telecommunications. 
D) None of the statements associated with this question are correct.

Question 15

Firms 1 and 2 compete in a Cournot duopoly.If firm 2 adopts a strategy that raises firm 1's marginal cost:

Accepted Answer

A) Firm 1's reaction function will shift up. 
B) Firm 2's reaction function will shift up. 
C) Firm 2's reaction function will shift down. 
D) Firm 1's reaction function will shift down. 
A) Firm 1's reaction function will shift up. 
B) Firm 2's reaction function will shift up. 
C) Firm 2's reaction function will shift down. 
D) Firm 1's reaction function will shift down.

Question 16

A two-way network linking 9 users creates how many potential network connections?

Accepted Answer

A) 72. 
B) 56. 
C) 90. 
D) 18. 
A) 72. 
B) 56. 
C) 90. 
D) 18.

Question 17

Limit pricing will effectively deter entry when

Accepted Answer

A) the incumbent links the pre-entry price to post-entry profits. 
B) the incumbent has incomplete information. 
C) the entrant must commit to enter the market. 
D) all of the statements associated with this question are correct. 
A) the incumbent links the pre-entry price to post-entry profits. 
B) the incumbent has incomplete information. 
C) the entrant must commit to enter the market. 
D) all of the statements associated with this question are correct.

Question 18

Suppose the production game depicted in the above payoff matrix is a sequential-move game.Identify the strategy leading to a first-mover advantage for player 1.

Accepted Answer

A) Player 1 moves first and plays High Q.Observing player 1's move player 2's best response is to play Low Q. 
B) Player 1 moves first and plays Low Q.Observing player 1's move player 2's best response is to play Low Q. 
C) Player 1 moves first and plays High Q.Observing player 1's move player 2's best response is to play High Q. 
D) Player 1 moves first and plays Low Q.Observing player 1's move player 2's best response is to play High Q. 
A) Player 1 moves first and plays High Q.Observing player 1's move player 2's best response is to play Low Q. 
B) Player 1 moves first and plays Low Q.Observing player 1's move player 2's best response is to play Low Q. 
C) Player 1 moves first and plays High Q.Observing player 1's move player 2's best response is to play High Q. 
D) Player 1 moves first and plays Low Q.Observing player 1's move player 2's best response is to play High Q.

Question 19

A two-way network linking 5 users creates how many potential network connections?

Accepted Answer

A) 5. 
B) 10. 
C) 20. 
D) 30. 
A) 5. 
B) 10. 
C) 20. 
D) 30.

Question 20

Firms 1 and 2 compete in a Cournot duopoly.If firm 2 adopts a strategy that raises firm 1's marginal cost:

Accepted Answer

A) Firm 1 will increase its output. 
B) Firm 2 will gain market share. 
C) Firm 2 will enjoy lower profits. 
D) All of the statements associated with this question are correct. 
A) Firm 1 will increase its output. 
B) Firm 2 will gain market share. 
C) Firm 2 will enjoy lower profits. 
D) All of the statements associated with this question are correct.

Network externalities

Consider a two-way network with 1,000 users.Adding one additional user to such a network benefits all users by adding

Nodes are

Firms that can effectively price discriminate will increase profitability when they engage in

Which of the following is false?

If one more user is added to a two-way network, it will generally

The price-cost squeeze is

Predatory pricing is a strategy

A two-way network that links users and the per-unit value of the service increases as the size of the network increases is a

A firm that engages in predatory pricing benefits from

Suppose the production game depicted in the above payoff matrix is a sequential-move game.Identify the strategy leading to a first-mover advantage for player 2.

Which of the following is not an example of a network?

Firms 1 and 2 compete in a Cournot duopoly.If firm 2 adopts a strategy that raises firm 1's marginal cost:

A two-way network linking 9 users creates how many potential network connections?

Limit pricing will effectively deter entry when

Suppose the production game depicted in the above payoff matrix is a sequential-move game.Identify the strategy leading to a first-mover advantage for player 1.

A two-way network linking 5 users creates how many potential network connections?

Firms 1 and 2 compete in a Cournot duopoly.If firm 2 adopts a strategy that raises firm 1's marginal cost:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

A Managers Guide to Government in the Marketplace

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Exam 13: Advanced Topics in Business Strategy

Network externalities

Consider a two-way network with 1,000 users.Adding one additional user to such a network benefits all users by adding

Nodes are

Firms that can effectively price discriminate will increase profitability when they engage in

Which of the following is false?

If one more user is added to a two-way network, it will generally

The price-cost squeeze is

Predatory pricing is a strategy

A two-way network that links users and the per-unit value of the service increases as the size of the network increases is a

A firm that engages in predatory pricing benefits from

Suppose the production game depicted in the above payoff matrix is a sequential-move game.Identify the strategy leading to a first-mover advantage for player 2.

Which of the following is not an example of a network?

Firms 1 and 2 compete in a Cournot duopoly.If firm 2 adopts a strategy that raises firm 1's marginal cost:

A two-way network linking 9 users creates how many potential network connections?

Limit pricing will effectively deter entry when

Suppose the production game depicted in the above payoff matrix is a sequential-move game.Identify the strategy leading to a first-mover advantage for player 1.

A two-way network linking 5 users creates how many potential network connections?

Firms 1 and 2 compete in a Cournot duopoly.If firm 2 adopts a strategy that raises firm 1's marginal cost:

The Fundamentals of Managerial Economics

Market Forces: Demand and Supply

Quantitative Demand Analysis

The Theory of Individual Behavior

The Production Process and Costs

The Organization of the Firm

The Nature of Industry

Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Basic Oligopoly Models

Game Theory: Inside Oligopoly

Pricing Strategies for Firms With Market Power

The Economics of Information

A Managers Guide to Government in the Marketplace

Filters