8. A network externality is a situation: a.) in which the marginal benefit from the consumption...

8. A network externality is a situation:

a.) in which the marginal benefit from the consumption of the good depends on the number of other individuals who also use the good.

b.) that often arises in the markets for transportation and communication.

c.) in which the value of a good to the consumer is dependent on how many other people also consume the same good.

d.) All above are true.

Expert Solution

In economics, a network effect or network externality or demand-side economies of scale is the effect that one user of a good or service as on the value of that project to other people when the network effect is present the value of a product or service is dependent on the number of other using it.

In simple terms

A network externality is a situation where one person's utility for a commodity is dependent on the number of other people who consume that commodity.

For eg - A consumer's demand for using Skype depends on the number of other people using Skype, as people want this app so that they can connect with each other. Suppose if no one uses this app then there will be no demand for this app by any single user.

Now coming to the above question

A network externality is a situation in which the marginal benefit from the consumption of the good depends on the number of other individuals who also use the good.

A network externality is a situation that often arises in the markets for transportation and communication

A network externality is a situation in which the value of a good to the consumer is dependent on how many other people also consume the same good.

all the above statements are correct as the first and third statements are defining network externality and the second statement is stating examples of it.

Hence option 4th is correct that is All the above are true

Rahul Sunny answered 1 year ago

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