Question 1

Network effects also known as -------------

Accepted Answer

A) Network goods 
B) Network Management 
C) Network Externalities 
D) Network Diagnosis C

Question 2

Production of software exhibits sharp ------------------

Accepted Answer

A) economies of scope 
B) economic welfare 
C) economic sustainabil 
D) economies of scale D

Question 3

The second theorem of _ states that any Pareto optimum can be supported as a competitive equilibrium for some initial set of endowments.

Accepted Answer

A) Public Choice 
B) Social Interest 
C) Welfare Economics 
D) Keynesian Economi C

Question 4

Which of the following started as a De facto standard?

Accepted Answer

A) ISO 
B) HTTP 
C) IEEE 
D) ANSI

Question 5

When users' preferences exhibit network externalities, and if computer brands are differentiated and incompatible, then ----------------

Accepted Answer

A) prices and profit levels decline with an increase in consumers' preference toward the network size. 
B) prices and profit levels increases with an increase in consumers' preference towards the network size. 
C) price increases and profit level decreases with an increase in consumers' preference toward the network size. 
D) price declines while profit level increase with an increase in consumers' preference towards the network size.

Question 6

When consumers are not identical, a market failure may occur when

Accepted Answer

A) a monopoly producer provides compatibility. 
B) a monopoly producer does not provide compatibility and compatibility is not socially preferred. 
C) a monopoly provides compatibility and compatibility is socially preferred. 
D) a monopoly producer does not provide compatibility but compatibility is socially preferred to incompatibility.

Question 7

Which one of the following goods is nonexcludable?

Accepted Answer

A) the Sunshine 
B) a Cab 
C) an art gallary 
D) a toll bridge

Question 8

Which of the following is NOT an issue involving network externalities?

Accepted Answer

A) the market may be too small 
B) the market may be to 
C) problem of monopol 
D) None of the above

Question 9

---------------------network effects arise when there are "at least two different customer groups that are interdependent, and the utility of at least one group grows as the other group(s) grow".

Accepted Answer

A) Direct 
B) Indirect (or cross-group) 
C) Two-sided 
D) Local

Question 10

In Duopoly, Social welfare is maximized when ----------------------

Accepted Answer

A) there is one-way compatibility. 
B) both machines are compatible. 
C) both machines are incompatible to each other. 
D) none of the above.

Question 11

When users' preferences exhibit network externalities,

Accepted Answer

A) computer producers charge higher prices and earn higher profits when they make their machines compatible; 
B) consumers are worse off when firms sell compatible machines. 
C) consumers are well off when firms sell compatible machines 
D) Both A & B

Question 12

Which of the following is a general policy issue surrounding the issue of network externalities?

Accepted Answer

A) Issues of private property rights and intellectual property issues 
B) Issues of monopoly re 
C) None of the Above 
D) Both A & B

Question 13

Network scales faster as it --------------

Accepted Answer

A) lowers its customer acquistion cost. 
B) higher its customer ac 
C) cost of acquisition remains constant.

Question 14

Network industries does not include ----------------

Accepted Answer

A) Telephone 
B) Airlines 
C) Banking 
D) Treasury Bonds

Question 15

Which of the following is true of a natural monopoly?

Accepted Answer

A) The firm can supply the entire market at a lower cost than could two or more firms. 
B) Its average total cost curve slopes upward as it intersects the demand curve. 
C) The firm is not protected by any barrier to entry. 
D) Economies of scale exist to only a very low level of output.

Question 16

Economies of scale result from

Accepted Answer

A) large fixed costs and/or weakly increasing variable costs 
B) low fixed costs and/or strongly decreasing variable costs 
C) large fixed costs and decreasing variable costs 
D) low fixed costs and weakly increasing variable costs

Exam 1: Externalities, Network Effects, and Monopolies