Companies Promoting Alternative Standards Can Be Locked Out of the Market

question 16

True/False

Companies promoting alternative standards can be locked out of the market when consumers are unwilling to bear the switching costs required to abandon the established standard and adopt the new standard.

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Definitions:

Indifference Curves

Graphical representations showing combinations of goods or services that provide the same level of satisfaction to a consumer.

Ordinary Goods

In a consumer’s utility function, those for which additional units of one good are required to compensate for fewer units of another, and vice versa; and for which the consumer experiences a diminishing marginal rate of substitution when substituting one good in place of another.

Marginal Rate

The rate at which one variable changes over the change in another variable, often used in the context of taxes or marginal rate of substitution in economics.

Substitution

The economic concept whereby consumers replace costlier items with less expensive alternatives, or firms switch between inputs to minimize costs.