Question

What is a network externality? Select one: a. It refers to having a network of suppliers and buyers for a good or service. b. It refers to lobbying to form a public enterprise. c. It refers to a situation in which a product's usefulness increases with the number of people using it. d. It refers to a product that requires connection to a network for it to be useful.

Answer 1

Answer:

c. It refers to a situation in which a product's usefulness increases with the number of people using it.

Explanation:

Network externalities also called demand-side economies of scale refers to the increasing utility that a user derives from the consumption of a product such that as the number of people who consume the product increases.

This phenomenon can also lead to a situation known as natural monopoly.