Explain how network externalities act as a barrier to entry
What will be an ideal response?
A network externality exists when an individual's decision to purchase a particular product provides benefits not only to that individual but to other users of the product as well. Consider, for example, Microsoft Windows and the Microsoft Office suite of applications. The individual consumer of these products is better off to the extent that she derives value from the product that exceeds the purchase price. However, to the extent that other users of the product are now able to share files and other information with the individual more easily because they are using the same set of products, those users are made better off by her purchase as well. As the number of people using the product gets larger, it becomes more difficult for a new competitor to successfully enter the market because it is increasingly more costly for users of the existing product to switch due to the potential lack of compatibility with the new product.
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What is the national security argument for restricting international trade? What is its flaw?
What will be an ideal response?
Which of the following changes shifts the AD curve down and to the left?
A) A temporary increase in government purchases B) A rise in the nominal money supply C) A decrease in corporate taxes D) A decrease in consumer confidence
Medicare is an example of a third-party payment for medical services that
A) causes providers to supply less of medical services than they would without the payment. B) causes buyers to consume more of medical services than they would without the payment. C) does not cause any change in the equilibrium position for medical services which existed without the subsidy. D) causes the price of medical services to rise for the consumer once the payment is provided.
The states that were hit hardest by the bank failures of the late 1980s
a. were primarily dependent on agriculture and the oil industry b. were primarily dependent on tourist revenues c. were located on the West coast d. were primarily dependent on fishing e. were located in the Northeast