Suppose that there are two goods, X and Y, that are competing for dominance in a market with network externalities. Furthermore, suppose that the market has chosen good X even though it is inferior to good Y and that the net benefits of switching from X to Y are $20 while the costs of switching are $30. If the market stays with good X, then __________________ has occurred. If the costs of switching were to fall to $15 and the market still stays with good X then ___________________________.
A)no market failure; market failure has occurred.
B)market failure; no market failure has occurred.
C)no market failure; there will still be no market failure.
D)market failure; there will still be market failure.

Question

Quizplus · Accepted Answer

Market failure has occurred because the net benefits of switching from X to Y are positive, but the costs of switching are too high.

Suppose That There Are Two Goods, X and Y, That