A Network Externality Is

question 45

Multiple Choice

A network externality is:

• A)a direct effect on an economic decision maker.
• B)an indirect effect on an economic decision maker.
• C)the effect that an additional participant in an activity has on the value of that activity for others.
• D)an uncompensated effect on someone other than the person who caused it.

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Definitions:

Externality

A consequence of an economic activity experienced by unrelated third parties; it can be either positive or negative.

Precision-estimates

The accuracy of an estimate in terms of how closely it predicts the actual value, often relevant in statistical analyses and forecasting.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Investment Project

A project or activity that involves spending capital with the expectation of future financial returns.