Ch 12-14 Econ Study Guide

Which statement describes a public good? A) It is nonrival in consumption and nonexcludable. B) It is rival in consumption and excludable. C) It is nonrival in consumption and excludable. D) It is rival in consumption and nonexcludable.

A) It is nonrival in consumption and nonexcludable.

When interest rates rise, how does this affect the present value of human capital investment? A) It makes human capital investment less worthwhile. B) It makes human capital investment more worthwhile. C) It raises the present value. D) It has no effect on present value and human capital investment.

A) It makes human capital investment less worthwhile.

Which point would represent a vicious cycle if a firm stays there too long?A) a B) b C) c D) d

A) a

The largest form of greenhouse gases caused by human activity is: A) carbon dioxide from the use of fossil fuel. B) carbon dioxide from deforestation. C) methane gases from livestock farming. D) nitrous oxides from synthetic fertilizer usage.

A) 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? A) core user B) casual user C) late adapter D) market leader

A) core user

Which financial instrument is strictly an IOU? A) corporate bond B) private equity capital C) venture capital D) a share of stock

A) corporate bond

Which of these is a pure public good? A) environmental protection B) a public park C) I-95 D) flu shots

A) environmental protection

Unlike positive externalities from physical goods, network externalities affect: A) existing and potential users. B) only potential users. C) only existing users. D) existing firms.

A) existing and potential users.

Global climate change is described as a public good because: A) it is subjected to the free rider problem. B) it is relatively easy to encourage countries to pay their share of pollution abatement costs. C) tradable emissions permits are sold worldwide. D) large developed countries create most of the world's greenhouse gases.

A) it is subjected to the free rider problem.

The main advantage of issuing stock to raise financial capital is: A) limited liability of risk B) ability to retain complete ownership C) not having to share profits with investors D) the ability to keep company information and data private

A) limited liability of risk

If, due to externalities, marginal social costs exceed marginal private costs at a particular quantity in the production of a good, then: A) production of the good is greater than the socially efficient amount. B) production of the good is less than the socially efficient amount. C) production of the good is efficient as long as marginal private costs equal marginal social benefit. D) production of the good is efficient as long as marginal private costs exceed marginal social benefit.

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

Which of these is an example of interconnection? A) sending a package to another country using the U.S. Postal Service B) sharing patent technology between iPhone and Galaxy C) national defense D) a public beach

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

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): A) teaser strategy. B) switching cost. C) lock-in strategy. D) intertemporal pricing strategy.

A) teaser strategy.

Facebook experienced a _____ when a large increase in subscribers made the network more appealing, encouraging even more members to join the network. A) virtuous cycle B) social cycle C) growth cycle D) vicious cycle

A) virtuous cycle

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? (Graph) A) D0 B) D2 C) S0 D) S2

B) 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? A) Demand and supply both shift left. B) Demand and supply both shift right. C) Demand shifts right and supply shifts left. D) Demand shifts left and supply shifts right.

B) Demand and supply both shift right.

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? A) The amount of the income stream needs to rise and/or cost of capital needs to rise. B) The amount of the income stream needs to rise and/or cost of capital needs to fall. C) The amount of the income stream needs to fall and/or cost of capital needs to rise. D) The amount of the income stream needs to fall and/or cost of capital needs to fall.

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

Which statement would describe a network effect? A) A Black Friday sale encourages you to buy a new TV. B) Your workout partner cancels her gym membership, so you end up doing so as well. C) You use your holiday bonus to pay off bills. D) A parade comes through town, disrupting traffic all afternoon.

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

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) a teaser strategy B) a switching cost C) bundling D) intertemporal pricing

B) a switching cost

The tipping point from which a virtuous cycle may generate occurs at which point on a network demand curve? (Graph) A) a B) b C) c D) d

B) b

Paying $5 on Amazon to stream a movie is an example of a service that is: A) excludable and rival in consumption. B) excludable and nonrival in consumption. C) nonexcludable and rival in consumption. D) nonexcludable and nonrival in consumption.

B) excludable and nonrival in consumption.

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? A) a network externality B) interconnection C) free-ridership D) tacit cooperation

B) interconnection

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: A) is the most important tool for earning higher income. B) is useful to the extent that it allows people to signal their natural talents. C) has absolutely no value or usefulness at all. D) gives people the tools to pursue a specific career path.

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

Global warming is described as a _____ negative externality with a _____ time horizon. A) large; short B) large; long C) small; short D) small; long

B) large; long

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: A) on the upward-sloping portion of the network demand curve. B) on the downward-sloping portion of the network demand curve. C) at the peak of the network demand curve. D) nowhere on the network demand curve because it doesn't apply to her.

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

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? A) treasury bonds B) private equity funding C) collateral D) bank loans at reasonable lending rates

B) private equity funding

When choosing to pursue college full-time, the costs that must be taken into account in a benefit-cost analysis include: A) tuition and room and board. B) tuition and forgone earnings during the time in college. C) room and board and the forgone earnings during the time in college. D) tuition and local transportation costs.

B) tuition and forgone earnings during the time in college.

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. A) physical B) virtual C) external D) internal

B) virtual

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? A) Flu shots create an external cost. B) If flu shots were not free, the number of people getting them would be larger than what is socially optimal. C) The externality generated by flu shots is more similar to that provided by landscaping than the externality generated by smoking. D) The externality is created by producers for producers

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

Which of these would NOT be categorized as "land" as a factor of production? A) a cornfield that is owned by a farming co-op B) a coal mine in West Virginia C) an axe used to cut down trees in a forest D) a stream that contains an abundance of trout

C) an axe used to cut down trees in a forest

. Innovation leads to all of these EXCEPT: A) a higher average standard of living. B) a greater variety of goods and services available for purchase. C) an increase in the inherent amount of land and natural resources available. D) an ability to use scarce resources more efficiently.

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

All of these are consequences of global warming EXCEPT: A) loss of coastlines B) reduction in the natural habitats of species C) an increase in the natural carbon absorption system D) rising numbers of droughts and heat waves

C) an increase in the natural carbon absorption system

The speed by which a network good can enter into a virtuous or vicious cycle is generally _____ that of a non-network good. A) about the same as B) slower than C) faster than D) unrelated to

C) faster than

The free rider problem typically results in a production of output that is: A) equal to the social optimal quantity. B) greater than the social optimal quantity. C) less than the social optimal quantity. D) undetermined without further information.

C) less than the social optimal quantity.

The value of cloud storage has risen as more people use it. This effect is best described as a: A) substitution effect. B) revenue effect. C) network effect. D) income effect

C) network effect.

The equilibrium point created by a virtuous cycle will occur on which part of the network demand curve? A) on the upward sloping section B) on the horizontal sloping section C) on the downward sloping section D) at the origin

C) on the downward sloping section

Which of the following is NOT one of the three main types of networks? A) physical B) social C) optical D) virtual

C) 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: A) teaser pricing. B) bundling. C) peak-load pricing. D) lock-in pricing

C) peak-load pricing.

An important tradeoff that entrepreneurs face in their decision making is _____ versus _____. A) profit; revenues B) costs; resources C) profit; risk D) efficiency; equity

C) profit; risk

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%? A) $2,000 B) $2,100 C) $1,736 D) $1,909

D) $1,909

. Which of these is nonexcludable but rival? A) a pure public good B) a pure private good C) a public good with exclusion D) a common property resource

D) a common property resource

Where would be the range where the network effect dominates the price effect? (Graph) A) c-e B) a-b C) d-e D) a-c

D) a-c

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? A) a teaser strategy B) versioning C) intertemporal pricing D) bundling

D) bundling

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: A) a teaser strategy. B) a switching cost. C) a lock-in strategy. D) intertemporal pricing.

D) intertemporal pricing.

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. A) greater; less B) less; less C) greater; greater D) less; greater

D) less; greater

As one progresses through his or her working life, the average income tends to _____, holding the level of education constant. A) constantly rise B) constantly fall C) fall then rise D) rise then fall

D) rise then fall

Which form of financial capital involves giving up ownership in a company? A) a bank loan B) a corporate bond C) a perpetuity bond D) shares of stock

D) shares of stock

Which of these is not a major cause of greenhouse gas emissions? A) deforestation B) burning fossil fuels C) livestock production D) soybean farming

D) soybean farming

What type of government policy is generally used when a positive externality is present? A) taxes B) restrictions on consumption C) restrictions on production D) subsidies

D) subsidies

Which of these is NOT an example of an intellectual property right? A) a copyright on a short novel you plan to publish B) a trademark on the McDonald's logo C) a patent on a new skateboard feature D) the name of a famous basketball player

D) the name of a famous basketball player

Which of these is an example of human capital investment? A) taking a break from school to pursue a new hobby B) participating in an employer's retirement savings plan that matches contributions C) purchasing a corporate bond in a technology company D) traveling to Beijing to study Chinese in hopes of pursuing a job at a consulate

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

When a new gym opens up in town with the capacity of serving 500 new members, the supply curve for this network would be: A) upward-sloping. B) downward-sloping. C) horizontal. D) vertical.

D) vertical.