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.

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Definitions:

Systematic Risks

The danger present in the whole market or a specific market segment, referred to as market risk, is unavoidable even with diversification.

Unsystematic Risks

The portion of risk in an investment that is attributable to the specific circumstances of an individual company or industry.

Efficient Frontier

A concept in portfolio theory where an investment portfolio is said to be efficient if it offers the highest expected return for a given level of risk.

Volatility

A statistical measure of the dispersion of returns for a given security or market index, indicating how much the price of a security, derivative, or index fluctuates.