A firm creates a network externality when:
A) customers using the product speak to each other
B) the benefit customers receive from using the firm's product increases as new customers are added
C) the products are produced using network technologies
D) all its products are connected

Question

Quizplus · Accepted Answer

Network externality occurs when the value or utility a user gets from a product or service increases as more people use it. This is directly described in option B, where the benefit to customers increases with the addition of new customers, typical of services like social networks, communication platforms, or any product where user interaction or user base size enhances the product's value.

A Firm Creates a Network Externality When