Tony has a cell phone,and his service provider is Verizon.When he calls his wife,Meleah,who is also a Verizon customer,he does not have to pay for those minutes.The more Verizon customers there are in the market,the more benefit Tony receives.This is:
A)a network externality.
B)the Coase theorem.
C)a Pigouvian subsidy.
D)a technology spillover.

Question

Quizplus · Accepted Answer

This scenario describes a network externality, which is a situation where the value of a product or service increases as more people use it. In this case, Tony benefits from having more Verizon customers in the market because he can call them without using his minutes. This creates a positive externality for Tony and other Verizon customers.

Tony Has a Cell Phone,and His Service Provider Is Verizon