When consumer preferences exhibit international network externalities, both countries are better off when both countries mutually recognize foreign standards than when both countries do not recognize foreign standards.

Question

Quizplus · Accepted Answer

International network externalities mean that the value of a product or service increases as more people use it globally. When countries mutually recognize foreign standards, it facilitates international trade, allows for larger markets, and enhances the benefits of these network externalities, leading to increased welfare in both countries compared to when they do not recognize each other's standards.

When Consumer Preferences Exhibit International Network Externalities, Both Countries Are