Some Economists Have Argued That Path Dependency and Switching Costs

question 129

Multiple Choice

Some economists have argued that path dependency 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 $3000 even though he would not have paid $3000 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:

Average Variable Cost

The variable cost per unit of output, computed by dividing total variable costs by the quantity of output produced.

Total Fixed Costs

The overall total of expenditures that remain steady, unaffected by how much is produced or outputted.

Average Fixed Costs

The constant production costs (unaffected by changes in output) divided by the production volume.

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Swords are bladed weapons used historically and today for ceremonial, martial, or symbolic purposes, characterized by long blades for slashing or thrusting.