Explain the different sources of negative network externalities
Negative network externalities may be a result of the snob effect. The snob effect is a negative network externality where a consumer wants to own a unique good. Negative network externalities can arise from congestion.
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Refer to the above figure. Use the DD-AA model to examine and compare the response of an economy under fixed and floating exchange rate to a permanent fall in foreign demand for its exports
What will be an ideal response?
Cruise liners offer last minute deals because
a. The marginal cost is higher than the marginal revenue since fixed costs are sunk b. The marginal costs of an additional passenger are very low at that point and companies gain by lowering prices c. The average cost of an additional passenger is very low at that point and companies gain by lowering prices d. All of the above
A Midwestern wheat farmer faces a horizontal demand curve because
a. it is so large relative to the market as a whole that it has no impact on market price b. it is so small relative to the market as a whole that it has no impact on market price c. it produces a good for which there are no substitutes d. it produces a good for which there are no complements e. it produces a good that no other firm in the industry produces
In a monopolistic competition scenario, as long as a firm is earning positive economic profits:
a. new competitors will be discouraged from entering the market. b. new competitors will continue to enter the market. c. a state of perfect competition will continue, balanced between new and existing competitors. d. the firm’s demand and marginal revenue curves will increase because of new competitors.