11) All of the following products are most likely to have significant network externalities except
A) cat food.
B) cell phones.
C) popular board games.
D) fax machines.
12) Which of the following is used to explain why a consumer’s willingness to buy Microsoft Office increases as the number of other people who use Microsoft Office increases?
A) network externalities
B) market failure
C) diminishing marginal utility
D) the income effect of a price change
13) A good is path dependent when
A) consumers get utility from consuming goods that others are consuming, such as restaurants.
B) the first technology that was adopted has an advantage over a better technology that came later.
C) people who move location follow the path of people who moved before them.
D) it can only be used in one way.
14) A standard which came to the market first, such as the QWERTY letter layout in typewriters, can become entrenched (this layout is still used in computer keyboards today). What is this phenomenon called?
A) network externalities
B) path dependency
C) sunk cost
D) comparative advantage
15) Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other, similar products. These economists believe that
A) consumers are always rational.
B) in practice, the gains from using a superior technology exceed the losses consumers incur from switching costs.
C) there is no good evidence that switching costs exist.
D) the government will prevent products with inferior technology from being sold to consumers.
16) Economists would refer to the increase in product sales because of celebrity endorsements as being the result of
A) network externalities.
B) the endowment effect.
C) social influence.
D) the ultimatum game.
17) One explanation for the increase in product sales because of celebrity endorsements is that people seem to receive ________ from goods they believe are popular.
A) more utility
B) diminishing utility
C) greater network externalities
D) increased path dependency
18) Many airlines have not reduced or eliminated fuel surcharges despite the price of oil dropping. A logical reason for this is that the decline in fuel prices
A) shifted the supply curve for airline tickets to the left, and at the same time an increase in demand for airline tickets shifted the demand curve to the right, so prices did not decline.
B) shifted the supply curve for airline tickets to the right, and at the same time a decrease in demand for airline tickets shifted the demand curve to the left, so prices still increased.
C) shifted the supply curve for airline tickets to the right, and at the same time an increase in demand for airline tickets shifted the demand curve to the right, so prices still increased.
D) shifted the supply curve for airline tickets to the left, and at the same time a decrease in demand for airline tickets shifted the demand curve to the left, so prices did not decline.
19) Research by Daniel Kahneman, Jack Knetch, and Richard Thaler has shown that companies like airlines were explicitly able to include a fuel surcharge in their prices because
A) consumers had no choice but to pay the price of the surcharges due to the lack of competition in the industry.
B) a government-imposed price ceiling on airline ticket prices left the airlines not other way to cover the increase in costs.
C) adding a separate fuel surcharge to the price of airline tickets did not actually increase the price of the tickets.
D) consumers see it as fair for firms to raise prices after an increase in costs.
20) For which of the following products is social influence likely to have the greatest impact?
A) toothpaste
B) restaurants
C) high-blood pressure medication
D) school textbook
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