Which Statement Best Describes the Relationship Between Network Effects and Innovation

question 24

Multiple Choice

Which statement best describes the relationship between network effects and innovation?

• A) Network effects decrease innovation within a standard but increase the number of innovative offerings that compete against a strongly established standard.
• B) Network effects increase innovation within a standard but decrease the number of innovative offerings that compete against a strongly established standard.
• C) More often than not, network effects foster innovation
• D) More often than not, network effects limit innovation

Comprehend the foundations of democracy and the source of legitimate government authority.

Understand the concepts of liberalism and libertarianism in the context of government action.

Understand the concept of inductive reasoning and its application.

Distinguish between the roles and powers of different branches of the U.S. government.

---

Definitions:

Degree of Operating Leverage

A financial ratio that measures the sensitivity of a company's operating income to its sales volume, highlighting the impact of fixed costs.

Variable Expenses

Costs that vary directly with the level of production or sales volume.

Operating Income

Earnings before interest and taxes (EBIT), representing the profit from a company’s ordinary, core business operations.

Contribution Format

An income statement layout that separates fixed and variable costs, allowing for the calculation of contribution margin and easier analysis of profitability.