A network externality occurs when
A)there is production cost savings from being networked with suppliers.
B)there is production cost savings from being networked with buyers.
C)the usefulness of a good is affected by how many other people use the good.
D)the usefulness of a good is affected by celebrities who use the good.

Question

Quizplus · Accepted Answer

A network externality occurs when the usefulness of a good is affected by how many other people use the good. The value of a product or service increases as more people use it, which results in a positive network externality. Conversely, if the value of a product decreases as more people use it, it results in a negative network externality. This phenomenon is commonly observed in the technology sector where adoption rates of social media platforms, video game consoles, or smartphones often dictate their success in the market.

A Network Externality Occurs When