ECON7100-M50 Spring 2015


  1. Good X and good Y are substitutes if
    1. the demand for Y decreases when the price for X increases.
    2. the demand for Y increases when the price for X decreases.
    3. the demand curve for Y shifts to the left when the price for X decreases.
    4. Both A and C.
  2. __________ are independently-used goods and __________ are networked goods.
    1. Telephones; fax machines
    2. Cell phones; magazines
    3. Highliter pens; beers
    4. Toothpastes; search engines
  3. Access to cars rather than ownership of cars cuts down air pollution because
    1. renters are more likely to drive more often.
    2. Renters have to pay for carbon tax.
    3. peer-to-peer rental cars are likely to be more fuel-efficient.
    4. ownership encourages more miles to be driven.
  4. The marginal cost of accommodating additional users of non-rival goods is _____, but the total cost of providing the goods may be _________.
    1. high; low.
    2. low; high.
    3. high; high
    4. low; low
  5. Movies in cinemas
    1. discourage the consumption of concession items at inflated prices.
    2. are complements to concession popcorn and soda.
    3. can be just as profitable without selling concession snack foods.
    4. Both A and B.
  6. A free-rider problem arises when
    1. Mary volunteers to help the local Public Radio station to raise funds instead of donating cash.
    2. the owner of a book asks his friend to read it for him instead of reading it himself.
    3. Mary is a regular listener of commercial radio but buys nothing from the advertisers.
    4. Mary lives with her mother but contributes nothing even though she is expected to.
  7. _______ are open-standard goods and ________ are closed-standard goods.
    1. Hard drives; iPads
    2. HD TVs; digital cameras
    3. iPods; X-boxes
    4. SD cards; USB drives
  8. Commercial TV network broadcast can (or must) be free because
    1. there is no way to exclude non-paying viewers of any TV programs.
    2. it costs nothing to broadcast TV programs.
    3. viewers simply would not pay for TV programs.
    4. there is no viewer congestion and viewers can be charged indirectly when they buy the advertised products.
  9. If good A is a complement to good Aa and good B is a complement to good Bb while good A and good B are substitutes, an increase in demand A would
    1. increase the demand for Bb.
    2. increase the demand for B and Bb.
    3. increase the demand Aa and decrease the demand Bb.
    4. Both A and C.
  10. The recent peer-to-peer sharing economy owes its existence to
    1. the generosity of the middlemen.
    2. Coase's scholarly paper on the nature of the firm.
    3. the lower transaction costs of matching supply and demand in the internet economy
    4. the generous spirit of the owners of capital goods with idle capacity.
  11. Manufacturers of durable goods can stabilize their revenue streams by
    1. buying companies that offer routine maintaining service.
    2. giving up the parts market.
    3. making their durable goods less durable.
    4. unilaterally shortening the warranty period.
  12. Demand for _____ increases as consumer income increases
    1. Substitute goods
    2. Normal goods
    3. Inferior goods
    4. Complementary goods
  13. _____ are first-party payment goods and ________ are third-party payment goods.
    1. Over-the-counter anti-itch cream; open-heart surgeries
    2. Non-prescription vitamin supplements; sun tanning sessions
    3. Public schools; kidney transplants
    4. Private schools; restaurant meals
  14. Which of the following is correct?
    1. Consumers prefer the low prices offered by open standards.
    2. Open-standard products are likely to be commodities that command high prices.
    3. Innovators prefer the competition offered by open standards.
    4. Closed-standard products open more doors for third-party suppliers.
  15. When a good is not subject to consumption rivalry, indirect funding would
    1. generate maximum benefit because even users with low marginal benefit will be attracted to the zero marginal cost.
    2. create unnecessary congestion.
    3. not make any difference to the service content regardless of the type of indirect funding.
    4. Both A and C.
  16. Which of the following is correct?
    1. House-brand products sell better during economic recession.
    2. Consumers tend to trade down from name-brand products during economic boom.
    3. Name-brand products sell better during economic recession.
    4. House-brand products sell better during economic boom.
  17. Most environmental problems exist because the environment is
    1. subject to consumption rivalry but easy to restrict access.
    2. subject to consumption rivalry but difficult to restrict access.
    3. subject to consumption non-rivalry but difficult to restrict access.
    4. subject to consumption non-rivalry but easy to restrict access.
  18. The difference between a public good and a low-congestion good depends on
    1. how it is funded.
    2. partly how technically feasible and expensive it is to exclude non-payers.
    3. consumption rivalry.
    4. Both A and B.
  19. Hewlett-Packard should _____ the price of its printer if it wants to sell _____ ink cartridges.
    1. Increase; more
    2. Reduce; less
    3. Reduce; more
    4. Keep constant; more
  20. A Public Television program on a DVD is sold as a ______ good; when it is broadcast on the air it is a _______ good; and when it is re-broadcast on cable television it is a _____ good.
    1. public; private; low-congestion
    2. private; low-congestion; public
    3. low-congestion; public; private
    4. private; public; low-congestion