A two-way network that links users and the per-unit value of the service increases as the size of the network increases is a
A)positive externality known as an indirect network externality.
B)negative externality known as an indirect network externality.
C)positive externality known as an direct network externality.
D)negative externality known as an direct network externality.

Question

Quizplus · Accepted Answer

A direct network externality is the situation where the value of a good or service to an individual increases as the number of other people using it increases. In this case, the per-unit value of the service increases as the size of the network increases, indicating a direct network externality. Also, the fact that it is a positive externality signifies that the impact is beneficial to users, rather than harmful, further confirming that the correct choice is (C).

A Two-Way Network That Links Users and the Per-Unit Value