Identify a True Statement About Network Effects

question 38

Multiple Choice

Identify a true statement about network effects.

• A)It makes it easier for new entrants to steal business from incumbent firms.
• B)It decreases the switching costs for customers, making it easier for them to choose between different brands.
• C)It is the growth in demand for a firm's product that results from a growth in the number of existing customers.
• D)It is the cumulative effect produced when one firm enters an industry and makes a profit which triggers other firms to enter the same industry.

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Definitions:

Price Increase

An upward adjustment in the price of a good or service, often due to factors like increased production costs or higher demand.

Behavioral Economists

Researchers who study the effects of psychological, cognitive, emotional, cultural, and social factors on the economic decisions of individuals and institutions.

Minimum Payments

The smallest amount of money that one is required to pay on a debt by a specified due date to avoid defaulting.

Interest Costs

The cost associated with borrowing funds, typically expressed as a percentage of the total amount borrowed.