Question 1

Which of the following is NOT an issue involving network externalities?
A)the market may be too small
B)the market may be to
C)problem of monopol
D)None of the above

Accepted Answer

B

Question 2

Which of the following is a general policy issue surrounding the issue of network externalities?
A)Issues of private property rights and intellectual property issues
B)Issues of monopoly re
C)None of the Above
D)Both A & B

Accepted Answer

Network externalities often lead to issues surrounding private property and intellectual property, as well as concerns about monopolistic behavior, making both A and B correct.

Question 3

Which one of the following goods is nonexcludable?
A)the Sunshine
B)a Cab
C)an art gallary
D)a toll bridge

Accepted Answer

Sunshine is nonexcludable because it is impossible to prevent anyone from enjoying its benefits, unlike the other options where access can be restricted.

Question 4

Network effects also known as -------------
A)Network goods
B)Network Management
C)Network Externalities
D)Network Diagnosis

Accepted Answer

Network effects are also known as network externalities, where the value of a product or service increases as more people use it.

Question 5

Network industries does not include ----------------
A)Telephone
B)Airlines
C)Banking
D)Treasury Bonds

Accepted Answer

Treasury bonds are government debt securities and do not constitute a network industry. Network industries typically involve the provision of services or infrastructure that benefits from network effects, such as telecommunications, airlines, and banking.

Question 6

The second theorem of _ states that any Pareto optimum can be supported as a competitive equilibrium for some initial set of endowments.
A)Public Choice
B)Social Interest
C)Welfare Economics
D)Keynesian Economi

Accepted Answer

The second theorem of welfare economics states that any Pareto optimum can be supported as a competitive equilibrium given some initial distribution of endowments. This theorem is foundational in welfare economics, illustrating the conditions under which market economies can achieve efficient outcomes.

Question 7

Economies of scale result from                          
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

Accepted Answer

Economies of scale occur when a company's production costs per unit decrease as it produces more units, often due to large fixed costs and/or weakly increasing variable costs. This means the cost of producing each additional unit falls as production scales up, typically because the fixed costs (like machinery or buildings) are spread over more units and the variable costs increase at a slower rate.

Question 8

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

Accepted Answer

Indirect (or cross-group) network effects occur when the value to one group of users increases as a result of an increase in the number of users in another group, fitting the description provided.

Question 9

Network scales faster as it --------------
A)lowers its customer acquistion cost.
B)higher its customer ac
C)cost of acquisition remains constant.

Accepted Answer

A network scales faster as it lowers its customer acquisition cost because this means it can add new users more efficiently and at a lower expense, facilitating quicker growth.

Question 10

Which of the following started as a De facto standard?
A)ISO
B)HTTP
C)IEEE
D)ANSI

Accepted Answer

HTTP (Hypertext Transfer Protocol) started as a de facto standard before being formalized by the IETF (Internet Engineering Task Force). It was initially developed by Tim Berners-Lee at CERN in the early 1990s and became the foundation of data communication for the World Wide Web. Its widespread adoption by web browsers and servers made it a de facto standard, which was later formalized into an official standard.

Question 11

Which of the following is true of a natural monopoly?
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.

Accepted Answer

A natural monopoly occurs when a single firm can supply the entire market at a lower cost than could two or more firms, due to economies of scale over the relevant range of output.

Question 12

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

Accepted Answer

When a monopoly producer does not provide compatibility in a situation where compatibility is socially preferred, it can lead to market failure. This is because the monopoly's decision prevents the market from reaching an efficient outcome that maximizes welfare by not allowing products or services to work together seamlessly.

Question 13

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

Accepted Answer

The answer of When users' preferences exhibit network externalities, and...

Question 14

When users' preferences exhibit network externalities,                                
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

Accepted Answer

The answer of When users' preferences exhibit network externalities,                                
A)computer...

Question 15

In Duopoly, Social welfare is maximized when ----------------------
A)there is one-way compatibility.
B)both machines are compatible.
C)both machines are incompatible to each other.
D)none of the above.

Accepted Answer

When both machines (or products) in a duopoly are compatible, it allows for greater interoperability, consumer choice, and potentially lower prices due to competition on a level playing field. This can lead to an increase in consumer surplus and overall social welfare. Compatibility can also lead to increased innovation as companies strive to differentiate their products in other ways.

Question 16

Production of software exhibits sharp ------------------
A)economies of scope
B)economic welfare
C)economic sustainabil
D)economies of scale

Accepted Answer

Production of software exhibits sharp economies of scale because the cost of producing additional units (copies) of software is very low once the initial version has been developed.

Quiz 1: Externalities, Network Effects, and Monopolies

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

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

Which one of the following goods is nonexcludable?

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

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

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

Economies of scale result from

---------------------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".

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

Which of the following started as a De facto standard?

Which of the following is true of a natural monopoly?

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

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

When users' preferences exhibit network externalities,

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

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