Question

In: Economics

The difference in price between hardback books and paperbacks is MOSTLY due to differences in production...

The difference in price between hardback books and paperbacks is MOSTLY due to differences in production costs. *

True

False

Instagram is a social networking Web site that is used by a growing number of individuals. Due to its popularity, it is now more difficult for new networking websites to enter and compete with Instagram. Instagram enjoys __________ as a barrier for others to enter the market. *

a network externality

price discrimination

a negative externality

economies of scale

Solutions

Expert Solution

1. The difference in price between hardback books and paperbacks is MOSTLY due to differences in production costs. True


A paperback is a type of book made from thick paper or paperboard cover and pages are attached to the binding with glue. It is more cheaper to the consumer.


Whereas, hardcover or hardback books have covers made from cardboard covered with cloth,plastic or leather. Hardback books have pages, glued into the spine, making easier for the reader to open. So it is more costlier than paperback book.


In terms of printing cost, hardcover book printing is more expensive than paperback book printing.

2. Instagram is a social networking Web site that is used by a growing number of individuals. Due to its popularity, it is now more difficult for new networking websites to enter and compete with Instagram. Instagram enjoys a network externality as a barrier for others to enter the market.

Network externalities refer to the effects a product or service has on a user when other users are using the same or compatible products or services. It's an event whereby large numbers of people improve the value of a good or service.


Instagram is an example of the network externality. Initially, there were few users on the Instagram since it was little value to anyone outside the business. However, as more users started using Instagram, it gained popularity and restricts other networking websites to enter and compete with Instagram. So, Instagram enjoys a network externality as a barrier for others to enter the market.

Rahul Sunny answered 2 years ago
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