Which of the following best defines a network externality?
a. the study of strategic interactions among economic agents
b. the costs involved in changing from one product to another brand or in changing
suppliers
c. a strategy that will be optimal regardless of opponents’ actions
d. when the number of other people purchasing the good influences quantity demanded
d. when the number of other people purchasing the good influences quantity demanded
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The theory that firms will be slow to change their products' prices in response to changes in demand because there are costs to changing prices is called
A) transactions cost theory. B) cost—benefit theory. C) menu cost theory. D) gift exchange theory.
When Lucian starts his new job, he is given the option to contribute to his retirement fund, which the company will match up to 5 percent of his base salary. Lucian knows he can afford to contribute to his retirement fund; he only needs to file a form to
activate the contributions and matching. According to prospect theory, if Lucian is typical in his behavior, we would expect him to: A. take full advantage of the matching contribution because that would maximize his financial well-being. B. not file the form to start the contribution and match. C. negotiate with his boss for a higher match in order to increase his returns. D. only start contributions if the retirement portfolio is heavily weighted in high-return assets.