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:

Profitability

The ability of a business to generate income in excess of its expenses, resulting in profit.

Net Margin

A financial metric that represents the percentage of revenue remaining after all operating expenses, interest, taxes, and preferred stock dividends have been deducted.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been deducted from total revenue.

Sales

The activity or process of selling products or services, which involves transactions between buyers and sellers.