If a product's usefulness increases with the number of users:
A)it is characterized by network externalities.
B)it is a natural monopoly.
C)it is a consortium enterprise.
D)the firm that produces it has an exclusive rights franchise.

Question

Quizplus · Accepted Answer

Network externalities occur when the value of a product or service increases as more people use it. A classic example of a product with network externalities is a telephone. The more people who have phones, the more valuable the phone is to each user because they are able to communicate with more people. In this case, the usefulness of the product is directly related to the number of users, and therefore it is characterized by network externalities.

If a Product's Usefulness Increases with the Number of Users