A network externality exists
A)in the television industry
B)outside the television industry
C)whenever an increase in the size of a network increases its value to current and potential members
D)whenever an increase in the size of a network increases its average total cost of production
E)whenever an increase in the size of a network increases its total cost of production

Question

Quizplus · Accepted Answer

A network externality exists when the value of a product or service increases as more people use it. This can occur both within and outside of the television industry. However, the increase in value to current and potential members is the defining characteristic of a network externality, while an increase in cost is not. Therefore, choices A, D, and E are incorrect.

A Network Externality Exists