With what is the product-variety externality associated

Question

Quizplus · Accepted Answer

The product-variety externality is associated with the consumer surplus that is generated from the introduction of a new product. This is because when a new product is introduced, it increases the range of choices available to consumers, and this variety may increase the utility that they derive from consuming the product. As a result, the demand for other products in the same industry may also increase, which can have spillover effects on other firms. This externality can have positive welfare implications for the society, as it can lead to a more efficient allocation of resources and encourages innovation and competition.

With What Is the Product-Variety Externality Associated