Correct : B. a cost or benefit caused by a producer that is not financially incurred or received by that producer.
2. Which of the following is NOT an issue involving network externalities?
Correct : B. the market may be to
3. Which of the following is a general policy issue surrounding the issue of network externalities?
Correct : D. Both A & B
4. Which one of the following goods is nonexcludable?
Correct : A. the Sunshine
5. A common resource is
Correct : C. rival and nonexcludable.
6. Cable television and air-traffic control are similar to each other because both of them are
Correct : B. nonrival.
7. A natural monopoly is
Correct : A. nonrival and excludable
8. A good that is rival and nonexcludable is a
Correct : A. common resource.
9. Supply-side economies of scale arise:
Correct : D. when a firm manufactures products in high volumes.
10. Public goods are provided by government because
Correct : D. free-rider problems result in underproduction by private markets.
11. Network effects also known as _
Correct : C. Network Externalities
12. Network industries does not include _
Correct : D. Treasury Bonds
13. The second theorem of _ states that any Pareto optimum can be supported as a competitive equilibrium for some initial set of endowments.
Correct : C. Welfare Economics
14. Economies of scale result from
Correct : A. large fixed costs and/or weakly increasing variable costs
15. _ 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".
Correct : B. Indirect (or cross-grou
16. Network scales faster as it _
Correct : A. lowers its customer acquistion cost.
17. Which of the following started as a De facto standard?
Correct : B. HTTP
18. Which of the following statements about a monopoly is FALSE?
Correct : B. Monopolies have no barriers to entry or exit.
19. Which of the following is true of a natural monopoly?
Correct : A. The firm can supply the entire market at a lower cost than could two or more firms.
20. When consumers are not identical, a market failure may occur when
Correct : D. a monopoly producer does not provide compatibility but compatibility is socially preferred to incompatibility.
21. When users’ preferences exhibit network externalities, and if computer brands are differentiated and incompatible, then _
Correct : A. prices and profit levels decline with an increase in consumers’ preference toward the network size.
22. When users’ preferences exhibit network externalities,
Correct : D. Both A & B
23. In Duopoly, Social welfare is maximized when _
Correct : B. both machines are compatible.
24. The firm with the higher market share under incompatibility earns _ under incompatibility whereas the firm with the smaller market share under incompatibility earns _ under compatibility.
Correct : C. a higher profit, a hig
25. Production of software exhibits sharp _.
Correct : D. economies of scale
26. The price charged by a monopoly hardware firm .
Correct : A. increases with consumers’ love for software variety parameter, α; consumers’ income, ω; and the number of consumers buying this machine, η
27. An increase in consumers’ preference for variety of software .
Correct : B. decreases both hardware prices and profits.
28. Equilibrium duopoly hardware prices and profits are higher when the machines are compatible than when they are incompatible.
Correct : A. TRUE
29. 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,
Correct : A. will reduce the variety of software specifically written for the A machine
30. Support-oriented consumers would prefer buying software over pirating software .
Correct : D. if p ≤ σq; i.e., if the price of the software package does not exceed the value of service provided by the software firm to its legal users.
31. _ 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.
Correct : A. Excess momentum
32. The duration of each technology, Δ,
Correct : C. increases with the population size of each generation, η, and decreases with the technology-growth parameter, λ.
33. 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.
Correct : A. TRUE
34. Entry into the telecommunication industry the utility of the already connected consumers whereas the utility of newly connected consumers _.
Correct : C. increases, remains u
35. Suppose that all technologies have the same duration. Then the frequency of technology revolutions (or new-technology adoption), denoted by f is
Correct : D. f ≝ 1/Δ.
36. The duration of each technology, Δ, with the population size of each generation, η, and with the technology-growth parameter, λ.
Correct : A. increases, decreases
37. 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.
Correct : B. critical mass
38. In order to connect each consumer to the network of services, the monopoly has to spend μ units of money, where _ .
Correct : B. μ < η
39. Suppose that the incumbent and the entrant in the long-distance phone call market compete in prices (rates). Then, _.
Correct : C. under the ECPR, only entrants with unit cost μE ≤ μI will enter the long-distance phone-call industry.
40. 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.
Correct : A. lottery system
41. In _ the government fails to extract all the rents associated with giving away the frequency band to the private sector.
Correct : B. auction
42. 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.
Correct : A. TRUE
43. Information is reproduced if each agent (the provider and each consumer) makes one copy for the benefit of another consumer.
Correct : B. Vertically
44. 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.”
Correct : B. FALSE
45. Under either vertical or horizontal information reproduction, total surplus enjoyed by the η consumers is _.
Correct : B. higher when information is digital compared with printed information.
46. The amount of uncaptured consumer surplus when information is digital exceeds the amount of uncaptured surplus when information is printed
Correct : A. TRUE
47. An increase in journal photocopying _ library’s value and hence funding, which in turn allows journal publishers to increase subscription fees.
Correct : B. increases
48. Selling to libraries yields a higher profit to the publisher than selling directly to readers when:
Correct : C. readers do not place a high value on owning the book.
49. The profit level of a bank declines when it makes its ATMs available for the customers of a competing bank.
Correct : A. TRUE
50. Which of the following is NOT an issue involving network externalities?