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.

---

Definitions:

Office of Management and Budget

A U.S. government office responsible for developing the federal budget and overseeing the effective implementation of government financial policies and programs.

Administrative Agencies

Government bodies responsible for the oversight and administration of specific functions, such as regulation or enforcement of laws and public policies.

Fourth Branch

Informal term for groups or entities, like the media or regulatory agencies, that influence but do not belong to the official branches of government.

Administrative Law Judges

Officials who preside over hearings involving federal regulatory agencies, making decisions on disputes between those agencies and individuals or entities.