2) For years, your neighbor insisted she had no desire to own a computer. Recently, however, she
purchased one and says she did so because all her relatives have computers and she wants to
exchange e-mail with them. Your neighbor’s behavior is an example of
A) a switching cost.
B) the impact of negative market feedback.
C) limited-pricing behavior.
D) a network effect.
3) For years, your parents claimed they had no desire to join a social web site. Recently,
however, they joined one and said they did so because all their relatives have joined the same site
with them. Your parents’ behavior is an example of
A) a switching cost.
B) a network effect.
C) the impact of positive market feedback.
D) the impact of negative market feedback.
4) A network effect arises whenever
A) firms in an oligopolistic industry engage in limit pricing.
B) firms in an oligopolistic industry engage in a zero-sum game.
C) a consumer’s willingness to purchase a good or service is influenced by how many others also
buy or have bought the item.
D) a producer’s willingness to produce a good or service is influenced by how many other firms
also produce or have produced the item.
5) When there is a tendency for a particular product to come into favor with additional
consumers because other consumers have chosen to purchase the product
A) negative market feedback occurs.
B) positive market feedback occurs.
C) there is no dominant strategy.
D) a price war must result.
6) When there is a tendency for a particular product to fall out favor with additional consumers
because other consumers have chosen not to purchase the product
A) negative market feedback occurs.
B) positive market feedback occurs.
C) the tit-for-tat strategy will begin.
D) the network effect will increase.
7) Negative market feedback refers to a tendency for
A) one or two firms in an oligopolistic industry to respond to price decreases by initiating efforts
to engage in price leadership.
B) a particular product to fall out of favor with additional consumers because other consumers
have stopped purchasing the product.
C) the dominant firm in an oligopolistic industry to react to competing firms’ price increases by
decreasing the price of its own product.
D) price wars to break out in oligopolistic industries in which firms produce products possessing
characteristics that make them prone to network effects.
8) Positive market feedback refers to a tendency for
A) potential entrants to an oligopolistic industry to respond to entry deterrence strategies by
contemplating setting their prices above prices established by firms already in the industry.
B) potential entrants to an oligopolistic industry to respond to entry deterrence strategies by
contemplating producing more output than the quantities produced by firms already in the
industry.
C) a particular product to come into favor with additional consumers because other consumers
have chosen to purchase the product.
D) price leaders to respond to an increase in market demand by increasing the prices of their
products.
9) A network effect exists whenever
A) a firm’s willingness to produce a particular good or service is influenced by the costs of inputs
it must utilize in order to manufacture the item.
B) a consumerʹs willingness to purchase a particular good or service is influenced by how many
others also buy or have bought the item.
C) a firm’s willingness to purchase a particular factor of production depends on the other types of
inputs it utilizes to manufacture an item.
D) a consumer’s willingness to purchase a particular good or service is influenced by the prices
of other complementary or substitute items.
10) A situation where a consumer’s willingness to use an item depends on how many others use
it is
A) a positive-sum game.
B) a network effect.
C) price-leadership.
D) a vertical merger.
11) When network effects are important, then an industry can experience
A) positive market feedback.
B) prince-leadership.
C) a zero-sum game.
D) a vertical merger.
12) When a new product is introduced in the market, a consumer always wants to see how
popular the item becomes before she purchases it. The consumer’s behavior is known as
A) overt collusion.
B) limit-pricing.
C) a network effect.
D) a rational decision.
13) When a falloff in usage of a product by some consumers causes others to stop purchasing the
item there is
A) a dominant effect.
B) a negative-sum game.
C) positive market feedback.
D) negative market feedback.
14) A tendency for a good to come into favor with consumers because other consumers have
chosen to buy the item is
A) price-leadership.
B) a negative-sum game.
C) positive market feedback.
D) negative market feedback.
15) Frank purchases snickle-dees only because his friends do. This is a
A) dominant strategy
B) negative-sum game.
C) positive market feedback.
D) negative market feedback.
16) Stephanie listens to rap music because her friends do. This is
A) a positive-sum game.
B) collusion.
C) positive market feedback.
D) negative market feedback.
17) Ahmed has decided not to purchase another can of Stosh because his friends laughed at him
the last time he purchased some. Stosh is no longer a popular item. Ahmed’s decision is known
as
A) price-leadership.
B) negative-sum game.
C) positive market feedback.
D) negative market feedback.
18) Because all of his friends stopped exclusively wearing black clothes, Doug wears anything
but black clothes. This is known as
A) a negative sum game.
B) collusion.
C) positive market feedback.
D) negative market feedback.
19) In an industry with network effects and differentiated products, it is possible for the industry
to become an oligopoly if
A) they engage in a zero-sum game.
B) they use a price-leadership model.
C) they use a kinked demand curve model.
D) a few firms reap most of the sales gains resulting from positive market feedback.
20) The idea that if enough consumers cut back on their use of a product it induces other
consumers to do the same is referred to as
A) positive market feedback.
B) non-dynamic market feedback.
C) negative market feedback.
D) elicit market feedback.
21) People’s willingness to buy the PC or Mac format of computer software depends on how
popular the software format is among other consumers. This is an example of
A) a cartel.
B) an opportunity cost.
C) a network effect.
D) the prisoners’ dilemma.
22) Which of the following is NOT subject to a network effect?
A) the layout of the keys on your keyboard
B) rotating your tires every six months
C) listening to popular songs
D) purchasing a new high-definition DVD player
23) An example of a positive market feedback is
A) installation of a phone app.
B) routine maintenance on a car.
C) the declining use of land-line telephones for long distance calls.
D) the use of telegraph services in the twenty-first century.
24) How can network effects lead an industry to become an oligopoly?
25) The main function of a platform firm is to
A) deal with the government on behalf of sellers.
B) link producers with consumers.
C) perform collective bargaining with sellers on behalf of buyers.
D) create entry barriers for an industry on behalf of existing firms.
26) In a two-sided market, a firm that provides services that link together groups of consumers
and producers is called a(n)
A) end user.
B) platform.
C) monopoly.
D) tit-for-tat.
27) In the television broadcasting industry, ________ is an end user and ________ is a platform.
A) an advertiser; a TV service provider
B) an advertiser; a TV regulatory agency
C) a TV service provider; a TV maker
D) a TV maker; TV audience
28) A realtor in the real estate market is an example of
A) an end user in a shared-input market.
B) a platform in a shared-input market.
C) a platform in a matchmaking market.
D) an end user in a matchmaking market.
29) Credit card companies that operate as intermediary firms between credit card holders and
business vendors are best described as
A) platforms in a shared-input market.
B) end users in a shared-input market.
C) platforms in a transaction-based market.
D) end users in a transaction-based market.
30) In the wireless communication industry, firms that provide broadband access to the Internet
are best regarded as
A) platforms in a shared-input market.
B) end users in a shared-input market.
C) platforms in a matchmaking market.
D) end users in a matchmaking market.
31) In the industry of phone apps, end users are
A) advertisers only.
B) app users only.
C) both advertisers and app users.
D) no one.
32) A radio station is best described as
A) an end user in a transaction-based market.
B) a platform in an audience-making market.
C) an end user in a matchmaking market.
D) a platform in a shared-input market.
33) An online dating firm is
A) a platform in a shared-input market.
B) an end user in a matchmaking market.
C) a platform in a matchmaking market.
D) an end user in a shared-input market.
34) In a two-sided market with network effects, the platform will most likely
A) set the same prices for the two sides of the market.
B) set different prices for the two sides of the market.
C) set a price of zero for both sides of the market.
D) combine the two groups of the market before setting its price.
35) In a two-sided market, an intermediary firm that links groups of producers and consumers is
called
A) an operator.
B) an oligopoly.
C) a platform.
D) an end user.