Extensive network effects may drive a market toward natural monopoly because consumers tend to choose a common, standard product that everyone else is using.

Question

Quizplus · Accepted Answer

As more and more consumers adopt a specific product or service, the value of that product or service increases, making it more attractive for new consumers to join the network. This cycle can result in a market dominated by a single firm or a small number of firms, known as a natural monopoly. Therefore, the statement is true.

Extensive Network Effects May Drive a Market Toward Natural Monopoly