Question 1

The price charged by a monopoly hardware firm .

Accepted Answer

The price charged by a monopoly hardware firm is likely to increase with factors that enhance demand, such as consumers' love for software variety, their income, and the number of consumers buying the machine, as these factors indicate a higher willingness to pay.

Question 2

An increase in consumers' preference for variety of software .

Accepted Answer

B

Question 3

Equilibrium duopoly hardware prices and profits are higher when the machines are compatible than when they are incompatible.

Accepted Answer

When machines are compatible, firms can benefit from network effects, leading to higher demand and allowing them to charge higher prices, resulting in increased profits.

Question 4

When there are two software industries, each producing brand-specific software, an increase in the degree of compatibility of the A- machine with the software written for the B- machine,

Accepted Answer

When the A-machine becomes more compatible with software written for the B-machine, developers have less incentive to write software specifically for the A-machine, as their software can now cater to both machines. This reduces the variety of software specifically written for the A machine.

Question 5

Support-oriented consumers would prefer buying software over pirating software .

Accepted Answer

Support-oriented consumers are more likely to purchase software legally if they perceive the value of the service provided by the software firm (such as customer support, updates, and additional features) to be greater than or equal to the price of the software. This aligns with choice D, where the price of the software does not exceed the perceived value of the service provided, making legal purchase more appealing.

Question 6

---------------------- occurs when a new technology replaces an old technology, but the old technology yields a higher utility (or profit) to both users than the new technology.

Accepted Answer

The answer of  ---------------------- occurs when a new technology replaces an...

Question 7

The duration of each technology, ?,

Accepted Answer

The duration of each technology increases with the population size of each generation because a larger population can support and develop a technology for a longer period. However, it decreases with the technology-growth parameter because a higher growth rate means technologies evolve faster, reducing the duration of each technology's dominance.

Question 8

When consumer preferences exhibit international network externalities, both countries are better off when both countries mutually recognize foreign standards than when both countries do not recognize foreign standards.

Accepted Answer

International network externalities mean that the value of a product or service increases as more people use it globally. When countries mutually recognize foreign standards, it facilitates international trade, allows for larger markets, and enhances the benefits of these network externalities, leading to increased welfare in both countries compared to when they do not recognize each other's standards.

Question 9

Entry into the telecommunication industry -------------- the utility of the already connected consumers whereas the utility of newly connected consumers --------------------.

Accepted Answer

The answer of Entry into the telecommunication industry -------------- the utility...

Question 10

Suppose that all technologies have the same duration. Then the frequency of technology revolutions (or new-technology adoption), denoted by f is

Accepted Answer

The frequency of technology revolutions, denoted by $f$, is inversely proportional to the duration of the technology, denoted by $\tau$. Therefore, $f = 1/\tau$.

Question 11

The duration of each technology, ?,----------------with the population size of each generation, ?, and with the technology-growth parameter, ?.

Accepted Answer

The answer of The duration of each technology, ?,----------------with the...

Question 12

The at a price (connection fee) p0 is the minimal number of customers needed to ensure that at least this number of consumers will benefit from subscribing to the service at the fee p0.

Accepted Answer

The correct term is "critical mass," which refers to the minimum number of customers needed to ensure that a service is viable or profitable at a certain subscription or connection fee. This concept is often used in network economics and technology adoption scenarios.

Question 13

In order to connect each consumer to the network of services, the monopoly has to spend ? units of money, where _ .

Accepted Answer

The answer of In order to connect each consumer to...

Question 14

Suppose that the incumbent and the entrant in the long-distance phone call market compete in prices (rates). Then,                                         _.

Accepted Answer

The answer of Suppose that the incumbent and the entrant...

Question 15

The for assigning scarce frequency band is inefficient as there is a strictly positive probability that frequency will be assigned to the less efficient firm.

Accepted Answer

The lottery system for assigning scarce frequency bands is considered inefficient because it randomly allocates frequencies without considering the efficiency or capability of the firms. This randomness means there's a chance that a less efficient firm could obtain a frequency over a more capable competitor, leading to potentially suboptimal use of the spectrum.

Question 16

In------------------the government fails to extract all the rents associated with giving away the frequency band to the private sector.

Accepted Answer

In an auction, the government sets a minimum price for the frequency band and then allows private companies to bid against each other. The company that offers the highest bid wins the right to use the frequency band. This system is designed to ensure that the government receives the highest possible price for the frequency band.

Question 17

In order to ensure that foreclosures will not take place, regulators should allow all service providers to sell the entire variety of telecommunication, broadcasting, and Internet services.

Accepted Answer

Regulators allowing all service providers to sell the entire variety of telecommunication, broadcasting, and Internet services would increase competition and innovation, making it less likely that any one provider would have a monopoly and be able to foreclose on competitors.

Question 18

Information is reproduced if each agent (the provider and each consumer) makes one copy for the benefit of another consumer.

Accepted Answer

The answer of Information is reproduced if each agent (the...

Question 19

Section 170 of Copyright Act states: "the fair use of copyrighted work ... for purposes such as criticism, comment, newsreporting, teaching (including multiple copies for classroom use), scholarship, or research, is an infringement of copyright."

Accepted Answer

Section 170 of the Copyright Act does not state that fair use is an infringement of copyright. Instead, fair use is a legal doctrine that permits limited use of copyrighted material without requiring permission from the rights holders, specifically for purposes such as criticism, comment, news reporting, teaching, scholarship, or research.

Question 20

Under either vertical or horizontal information reproduction, total surplus enjoyed by the ? consumers is ----------------------.

Accepted Answer

Digital information typically incurs lower reproduction and distribution costs compared to printed information, making it more accessible and potentially increasing the total surplus for consumers.

Quiz 2: Various Economic and Issues