ECON7100-M50 Spring 2015

Self-Study07

1. Maximum _________ economic efficiency is achieved when ________ where the _________ goes entirely to __________.
   1. static; P = MC; economic surplus; producers
   2. static; P > MR = MC; economic surplus; consumers
   3. dynamic; P = MC; economic surplus; consumers.
   4. static; P = MC; economic surplus; consumers
2. The world economy would be more efficient if
   1. A universal third measurement system is adopted.
   2. Both the metric and the American systems are used.
   3. No measurement system is used at all.
   4. Either the metric or the American systems of measurement is used.
3. Mass piracy is most likely to occur when
   1. The marginal cost (MC) of reproduction is high but the R and D cost (i.e., fixed cost) of coming up with the original is low.
   2. Every item is unique and expensive to produce.
   3. The price charged is much higher than the marginal cost (MC) of piracy.
   4. All of the above.
   5. Both A and C.
4. Patented or copyrighted products enjoy a longer period of pricing power because
   1. Competitors cannot legally offer patent-infringing products before the patent expires.
   2. Competitors cannot charge a lower price for a legal copycat product.
   3. Competitors are not allowed to see the protected patents.
   4. None of the above.
5. Brands could signal quality because
   1. brands are inexpensive to establish.
   2. it is in the interest of the brand holder to maximize short-term profit.
   3. unbranded goods have no reputation to protect.
   4. branded products are usually less expensive.
6. Which of the following products have major network externality effects?
   1. languages
   2. ballpoint pens
   3. popsicles
   4. BMW
7. Effective competition must involve
   1. Many competing buyers and sellers.
   2. A balance of power between buyers and sellers.
   3. Buyers enjoying maximum consumer surplus.
   4. Free entry and free exit.
   5. Both B and D.
8. An open standard benefits consumers because
   1. sellers using the open standard can rely on brand loyalty.
   2. the switching cost between standardized products for consumers is low.
   3. open standard would encourage the entry of closed proprietary standards.
   4. the licensing fee for using the open standard is no higher than using the closed standard.
9. Generic goods ________, while heavily-advertised brands ___________.
   1. Are inferior goods; are normal goods
   2. Emphasize value; emphasize quality
   3. Appeal to brand loyalty; appeal to value loyalty
   4. All of the above.
   5. Both A and B.
10. Which of the following services can be profitably offshored?
    1. Major non-emergency elective surgery.
    2. Routine dental care.
    3. Drug testing on animals.
    4. Both A and C.
    5. Hair cut.
11. House brands ________, while heavily-advertised brands ___________.
    1. appeal to brand loyalty; appeal to value loyalty
    2. emphasize quality; emphasize value
    3. are inferior goods; are normal goods
    4. appeal to high income buyers; appeal to low income buyers
12. An open standard benefits consumers because
    1. the switch cost between standardized products is high.
    2. the licensing fee for using the open standard is no higher than using the closed standard.
    3. sellers using the open standard are forced to compete on prices.
    4. open standard would encourage the entry of closed proprietary standards.
13. ________ determine which competing standards will win out.
    1. Late adopters
    2. Early adopters
    3. Fence sitters
    4. Sellers
14. In the real world, successful new products command
    1. Higher prices
    2. Lower prices
    3. Higher profit
    4. Lower profit
    5. Both A and C.
15. The U.S. chicken business has been profitable by
    1. adding value to a commodity product.
    2. paying low wages to match low labor productivity.
    3. standardizing the product into bar-codeable packages.
    4. Both A and C.
16. A disruptive technology usually
    1. appeals to the high-end users of the current technology from the get go.
    2. appeals to the low-end users of the current technology because of the technical sophistication it brings.
    3. comes when there is no dominant technology in the market.
    4. is ignored by the dominant player in the current technology because of its initial low-profit margin.
17. Which products would probably save you money by buying later (either in new or used conditions) than now?
    1. New consumer durable goods with projected demand likely exceeding projected supply.
    2. New durable consumer goods subject to substantial capital depreciation but with an active used-good market.
    3. Limited edition art objects by emerging artists.
    4. Collectors' items.
18. Early adopters of new products tend to
    1. be less price sensitive than late adopters.
    2. have less urgent needs than late adopters.
    3. pay less than late adopters.
    4. lower reservation prices.
19. Early adopters of new products pay for most of the __________, and late adopters pay for only a little more than the _____.
    1. marginal cost; R&D cost
    2. fixed cost; average variable cost
    3. R&D cost; marginal cost
    4. fixed cost; average cost
20. Generic drugs are cheaper because
    1. they are not as potent as the brand-name drugs.
    2. generic-drug makers are non-profits.
    3. generic drugs are subject to price control
    4. their makers do not have to pay for the R & D costs to develop the drugs.