Many Economists Do Not Believe That Network Externalities Lock Consumers

question 117

Multiple Choice

Many economists do not believe that network externalities lock consumers into the use of products that have technology inferior to other, similar products.These economists believe that

• A)consumers are always rational.
• B)in practice, the gains from using a superior technology exceed the losses consumers incur from switching costs.
• C)there is no good evidence that switching costs exist.
• D)the government will prevent products with inferior technology from being sold to consumers.

Acknowledge the efficiency gains from competition and the market's role in allocating resources to their most valued uses.

Understand the role and impact of consumers' preferences in a market economy.

Comprehend the economic functions of profits and losses and their impact on resource allocation.

Recognize the significance of competition and innovation in a market system.

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Definitions:

Short 100 Shares

The action of selling 100 shares of stock that one does not own, betting that the stock's price will decline and it can be repurchased at a lower price for a profit.

Market Price

The current price at which an asset or service can be bought or sold in the market.

Short Transactions

Financial activities where securities are borrowed and sold with the expectation to buy them back at a lower price for a profit, betting on declining market prices.

Street Name

A practice where securities are held in the brokerage firm's name on behalf of a client, facilitating easier trade execution and maintenance.