What are network effects? How do they contribute to economies of scale?
What will be an ideal response?
As the total number of users increases on a network such as the Internet there are increases in the value of Internet-related products for each user on the network. The benefits from products also push users to select standardized products so they can communicate more easily or complete business faster. The standardization can create economies of scale so that products can be produced at a lower average cost. These economies of scale can also create monopolies if one firm’s product is a basic standard for the network. These firms, however, may not be natural monopolies because they achieve minimum efficient scale at less than the full size of the market.
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Refer to the figure below.________ inflation will eventually move the economy pictured in the diagram from short-run equilibrium at point ________ to long-run equilibrium at point ________. 
A. Rising; A B. Falling; A; C C. Falling; B: C D. Rising; A; C
The above figure shows the market for rice in Japan. SDomestic represents the domestic supply curve, and Sworld represents the world supply curve. A $1 per unit tariff has the same effect on producer and consumer surplus as a quota of
A) 25 units. B) 30 units. C) 35 units. D) 65 units.
An economist has conducted extensive research and has found that Jones Cola is a substitute for Tucker Cola. Ceteris paribus, the price of Jones Cola increases. The impact on the demand curve for Tucker Cola is a(n):
a. increase in demand. b. decrease in demand. c. increase in quantity demanded. d. decrease in quantity demanded.
In which of the following markets are we most likely to find a monopoly?
a. Automobile production. b. Air travel. c. First-class mail delivery. d. Clothing production.