A network externality occurs when
A) a firm has a patent.
B) the value of a product to a consumer increase with the number of other consumers who use it.
C) a firm has large economies of scale.
D) the value of a product to a consumer requires another product.

Question

Quizplus · Accepted Answer

A network externality occurs when the value of a product or service increases for a consumer as more people use it. This can create a positive feedback loop where more people start using the product or service because others are already using it, causing the value to increase even more. This is often seen in industries like social media, where the more people use a platform like Facebook or Instagram, the more valuable it becomes for each individual user.

A Network Externality Occurs When