An advantage of Microsoft windows is its compatibility with the widest range of hardware and software. The dominance of Windows is self-reinforcing: hardware and software manufacturers ensure that their products are compatible with Windows in order to have access to the large number of Windows users. Which principle best describes this scenario?
A) endowment effects
B) endorsement effects
C) economies of scale
D) network externalities

Question

Quizplus · Accepted Answer

This scenario best describes network externalities, which is the phenomenon where the value of a product or service increases as more people use it. In this case, the more people use Windows, the more valuable it becomes because of its compatibility with a wide range of hardware and software. This creates a self-reinforcing cycle where hardware and software manufacturers ensure their products are compatible with Windows to gain access to the large number of Windows users, which further increases the value of using Windows.

An Advantage of Microsoft Windows Is Its Compatibility with the Widest