45) Which goods represent network goods? A) fireworks, lighthouse, swimming pool

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45) Which goods represent network goods? A) fireworks, lighthouse, swimming pool B) Pepsi, toilet paper, headphones C) calculator, oven, couch D) Twitter, Microsoft Excel, Facebook 46) The following shows a payoff matrix with two players and two strategies. The payoffs are listed in the order of Player 1's payoffs, Player 2's payoffs. What is Player I's optimal strategy in this game? Player 2's Strategies Cheat 400, 2,000) Cooperate Player I'sCooperate(1,000, 1,000) Strategies Cheat (2,000, 400)(500, 500) A) always cheat B) always cooperate C) cooperate when Player 2 cooperates; cheat when Player 2 cheats D) cheat when Player 2 cooperates; cooperate when Player 2 cheats 47) A cartel is a: A) market with a large number of firms selling similar but not identical products. B) market that is dominated by a small number of firms. C) group of suppliers that tries to act as if they were a perfectly competitive market. D) group of suppliers that tries to act as if they were a monopoly. 8) A network good is a good that people benefit from as pcople use it. A) more; more B) more; fewer C) the most; no other D) less; more Monopolistic competition combines features of: A) perfect competition and monopolies ) B) shortages and surpluses. C) oligopolies and monopolies. D) elastic and inelastic goods. In 2011, Google introduced its social networking site, Google+. Even though Google+ is cleaner more straightforward than its nearest competitor, Facebook, it still has trouble competing with Facebook because: A) the market is still contestable. B) everyone's already on Facebook. C) Facebook has a monopoly on social networking. D) most people don't know about it.

Explanation / Answer

1. (45) Network goods are those goods or network effect of goods exists when the benefit of the good increases with more people consuming it. In the above options, network goods are Twitter, Microsoft Excel, and Facebook. As more and more people are using Facebook and Twitter the benefit of using these goods increases because more people are generating content benefiting other users with them. Think how boring Facebook will be if there are only 10 users on it.

2. (46) C. Cooperate when player 2 cooperates, cheat when player two cheats. Given the above options If players always cheat they will only get 500 each, but if they cooperated they will get 1000 each.

On the other hand, If one player cooperates and other cheats the player cooperating will only get 400 and cheating one will get 2000. Keeping the situation in mind option C is the optimal strategy. To cooperate when player 2 cooperates and cheat when player 2 cheat. This way player 1 will not be on the losing side.

3. (47) D. Cartel can be defined as a group of suppliers that tries to act as if they were a monopoly. Example of Cartel is OPEC.

4. (48) A. A network good is a good that people benefit more from as more people use it. Example Twitter.

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