A network effect arises whenever
A) firms in an oligopolistic industry engage in limit pricing.
B) firms in an oligopolistic industry engage in a zero-sum game.
C) a consumer's willingness to purchase a good or service is influenced by how many others also buy or have bought the item.
D) a producer's willingness to produce a good or service is influenced by how many other firms also produce or have produced the item.

Question

Quizplus · Accepted Answer

Network effects arise when a consumer's willingness to purchase a good or service is influenced by how many others also buy or have bought the item. This leads to a positive feedback loop where the more people using a product, the more valuable it becomes to others, which in turn attracts even more users. This effect can be seen in social media platforms, where users are more likely to join and stay on a platform with more active users.

A Network Effect Arises Whenever