Some Economists Have Argued That Path Dependence and Switching Costs

question 2

Multiple Choice

Some economists have argued that path dependence and switching costs can lead to market failure.Which of the following is an example of this argument?

• A)Costly celebrity endorsements lead many consumers to buy a product even though it is more expensive or less effective than a product that is not endorsed by a celebrity.
• B)A consumer who won a lottery for a Super Bowl ticket refuses to sell it for $3,000 even though he would not have paid $3,000 for a ticket if he had not won the lottery.
• C)While playing the ultimate game, an allocator decides to share $20 equally with a recipient rather than keep the $20 for herself.
• D)VHS video recorders became more popular with consumers than Sony Betamax recorders even though the Betamax recorders embodied a superior technology.

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Definitions:

Antibodies

Proteins produced by the immune system that recognize and neutralize foreign substances like bacteria and viruses.

Decrease

A reduction in quantity, size, intensity, or the importance of something.

Tequila

A distilled beverage made from the blue agave plant, primarily in the area surrounding the city of Tequila, Mexico, known for its strong flavor and alcoholic content.

Classical Conditioning

An educational procedure in which the frequent pairing of two stimuli causes a response initially triggered by the second stimulus to be eventually triggered by the first stimulus alone.