Network externalities are important because Choose one:

(A) increasing membership increases the benefits to other members, which increases quantity demanded

(B) increasing benefits imposes a negative externality on existing members

(C) as the network size grows, the services become cheaper

(D) their large networks inflict negative externalities on potential competitors

Question

Business

Michael Simmons

4 October, 23:01

Network externalities are important because Choose one:

(A) increasing membership increases the benefits to other members, which increases quantity demanded

(B) increasing benefits imposes a negative externality on existing members

(C) as the network size grows, the services become cheaper

(D) their large networks inflict negative externalities on potential competitors

+1

Answers (1)

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Hobbes · Answer 1

(C) as the network size grows, the services become cheaper.

Explanation:

Network externalities relate to the economies of scale, it is basically the relation of demand with the quantum.

As when the production increases then due to increase in number of units, the cost of producing is less. Accordingly if the supply is more then price is less for the consumers. This clearly relates to services also.

Thus, when there is a growth in network size then the cost of such service or goods tend to decline as on per service basis.