Network Externalities Are Fueled by Three Sources

question 81

Multiple Choice

Network externalities are fueled by three sources:

• A)Minimizing switching costs, the existence of a natural network in an industry, and the availability of complementary products or services
• B)The existence of a natural network, the extent to which the government allows firms in an industry to externalize their costs, and the level of innovation in this industry
• C)The availability of complementary products or services, the importance of barriers to entry, and the level of innovation in an industry
• D)The level of innovation in an industry, the nature of the fundamental knowledge involved in this industry, and the availability of complementary products or services

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Definitions:

Elasticity Of Demand

This metric indicates the reaction of the quantity of a product demanded by consumers to shifts in its price, expressed as the ratio of the percentage change in demand to the percentage change in the product's price.

Marginal Costs

The cost associated with producing one additional unit of a good, highlighting the changes in total production cost.

Profit Maximizing

A strategy or point at which a business achieves the highest level of profit possible with the given resources and market conditions.

Parallel Conduct

Form of implicit collusion in which one firm consistently follows actions of another.