econ ch 12-14

Which point would represent a vicious cycle if a firm stays there too long?

a

Brett won a scholarship competition that will award him with $1,000 today and another $1,000 next year. What is the present value of the scholarship money if the interest rate is 10%?

$1,909

When an activity has a private marginal benefit of D1, a private marginal cost of S1, and a positive externality, which curve best represents the social marginal benefit?

D2

Suppose your bank opens up a dozen more branches throughout the city, making it much easier to find an ATM. What happens to the demand and supply curves for this network as it expands?

Demand and supply both shift right.

Which statement describes a public good?

It is nonrival in consumption and nonexcludable.

When interest rates rise, how does this affect the present value of human capital investment?

It makes human capital investment less worthwhile.

When interest rates rise, what needs to happen in order for the present value of an asset to remain the same, using a rate of return approach?

The amount of the income stream needs to rise and/or cost of capital needs to fall.

Mara gets a free flu shot from her campus clinic. As a result, she and her roommates avoid the flu all season. Which statement is true?

The externality generated by flu shots is more similar to that provided by landscaping than the externality generated by smoking.

Which statement would describe a network effect?

Your workout partner cancels her gym membership, so you end up doing so as well.

Which of these is nonexcludable but rival?

a common property resource

In order for someone to cancel cable service, the cable company requires customers to either stand in line to return their modem boxes or pay for the cost of the device. This is an example of:

a switching cost

Where would be the range where the network effect dominates the price effect?

a-c

Which of these would NOT be categorized as "land" as a factor of production?

an axe used to cut down trees in a forest

Innovation leads to all of these EXCEPT:

an increase in the inherent amount of land and natural resources available

All of these are consequences of global warming EXCEPT:

an increase in the natural carbon absorption system

The tipping point from which a virtuous cycle may generate occurs at which point on a network demand curve?

b

Most new smartphones come pre-installed with a selection of free apps, including a weather app, health app, and news app. Which marketing strategy is the phone provider using?

bundling

The largest form of greenhouse gases caused by human activity is:

carbon dioxide from the use of fossil fuel.

During the upward sloping part of a network good demand curve, which type of customer is likely to drive the sale of the good?

core user

Which financial instrument is strictly an IOU?

corporate bond

Which of these is a pure public good?

environmental protection

Paying $5 on Amazon to stream a movie is an example of a service that is:

excludable and nonrival in consumption.

Unlike positive externalities from physical goods, network externalities affect:

existing and potential users.

The speed by which a network good can enter into a virtuous or vicious cycle is generally _____ that of a non-network good.

faster than

When one makes a call to someone using a different cellular provider, what must occur between the two networks in order for the call to be connected?

interconnection

Movies are typically only shown in theaters for months before they are released on online streaming sites at a lower price. This is an example of:

intertemporal pricing.

People who believe that success in one's career depends largely on one's innate intellect and work ethic would argue that a college education:

is useful to the extent that it allows people to signal their natural talents.

Global climate change is described as a public good because:

it is subjected to the free rider problem.

Global warming is described as a _____ negative externality with a _____ time horizon.

large; long

The free rider problem typically results in a production of output that is:

less than the social optimal quantity

If an unregulated industry generates pollution, the market price is _____ than the socially optimal price, and the market quantity is _____ than the socially optimal quantity.

less; greater

The main advantage of issuing stock to raise financial capital is:

limited liability of risk

The value of cloud storage has risen as more people use it. This effect is best described as a:

network effect.

The equilibrium point created by a virtuous cycle will occur on which part of the network demand curve?

on the downward sloping section

Your grandma finally buys an iPad only after being convinced of the benefits of using it to communicate with the rest of her family who already have iPads. Her demand for an iPad would be represented:

on the downward-sloping portion of the network demand curve.

Which of the following is NOT one of the three main types of networks?

optical

A hotel room at a ski resort might be priced at $319 per night during the months of December to March but priced at $199 per night the rest of the year. This type of pricing is called:

peak-load pricing.

If a company is on the verge of bankruptcy and has lost its ability to issue bonds or stock due to a lack of confidence by investors, which source of financial capital might still be available?

private equity funding

If, due to externalities, marginal social costs exceed marginal private costs at a particular quantity in the production of a good, then:

production of the good is greater than the socially efficient amount.

An important tradeoff that entrepreneurs face in their decision making is _____ versus _____.

profit; risk

As one progresses through his or her working life, the average income tends to _____, holding the level of education constant.

rise then fall

Which of these is an example of interconnection?

sending a package to another country using the U.S. Postal Service

Which form of financial capital involves giving up ownership in a company?

shares of stock

Which of these is not a major cause of greenhouse gas emissions?

soybean farming

What type of government policy is generally used when a positive externality is present?

subsidies

AT&T offers high-speed Internet service to new subscribers for $29.99 per month for the first six months and then raises the price to $49.99 per month. This offer is an example of a(n):

teaser strategy

Which of these is NOT an example of an intellectual property right?

the name of a famous basketball player

Which of these is an example of human capital investment?

traveling to Beijing to study Chinese in hopes of pursuing a job at a consulate

When choosing to pursue college full-time, the costs that must be taken into account in a benefit-cost analysis include:

tuition and forgone earnings during the time in college.

When a new gym opens up in town with the capacity of serving 500 new members, the supply curve for this network would be:

vertical.

As more people rely on a travel app to book reservations, the quality of the app improves, encouraging more people to use the app. This type of network is best described as a _____ network.

virtual

Facebook experienced a _____ when a large increase in subscribers made the network more appealing, encouraging even more members to join the network.

virtuous cycle