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Economics of Network Industries Practice Test
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An economic network is a combination of individuals, groups, or countries who pool resources and competitive advantages to benefit each other. Common types of economic networks are joint ventures between two or more companies or partnerships between corporations.

Examples of Network effects (network economies of scale?):
Social media platforms (e.g. Facebook, Instagram)
Online marketplaces (e.g. Amazon, eBay)
Communication platforms (e.g. WhatsApp, Zoom)
Payment platforms (e.g. Visa, PayPal)
Operating systems (e.g. Windows, iOS)
Navigation apps (e.g. Google Maps, Waze)

Economics of Network Industries Practice Test
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25 Questions

1. In Duopoly, Social welfare is maximized when _____________............. _
2. Which one of the following goods is nonexcludable?
3. The at a price (connection fee) p0 is the minimal number of customers needed to ensure that at least this number of consumers will benefit from subscribing to the service at the fee p0.
4. When there are two software industries, each producing brand-specific software, an increase in the degree of compatibility of the A- machine with the software written for the B- machine,
5. Equilibrium duopoly hardware prices and profits are higher when the machines are compatible than when they are incompatible.
6. When consumers are not identical, a market failure may occur when
7. Production of software exhibits sharp _____________............. _.
8. In order to ensure that foreclosures will not take place, regulators should allow all service providers to sell the entire variety of telecommunication, broadcasting, and Internet services.
9. Network effects also known as _____________............. _
10. Support-oriented consumers would prefer buying software over pirating software _____________ _____________ .
11. Entry into the telecommunication industry _____________ the utility of the already connected consumers whereas the utility of newly connected consumers _.
12. Which of the following is NOT an issue involving network externalities?
13. A good that is rival and nonexcludable is a
14. When consumer preferences exhibit international network externalities, both countries are better off when both countries mutually recognize foreign standards than when both countries do not recognize foreign standards.
15. _____________............. _ occurs when a new technology replaces an old technology, but the old technology yields a higher utility (or profit) to both users than the new technology.
16. Supply-side economies of scale arise:
17. The second theorem of _ states that any Pareto optimum can be supported as a competitive equilibrium for some initial set of endowments.
18. An increase in consumers’ preference for variety of software .
19. Cable television and air-traffic control are similar to each other because both of them are
20. Suppose that all technologies have the same duration. Then the frequency of technology revolutions (or new-technology adoption), denoted by f is
21. In _ the government fails to extract all the rents associated with giving away the frequency band to the private sector.
22. The price charged by a monopoly hardware firm .
23. An externality is defined as
24. Selling to libraries yields a higher profit to the publisher than selling directly to readers when:
25. An increase in journal photocopying _____________ _ library’s value and hence funding, which in turn allows journal publishers to increase subscription fees.

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