Why Do Economies of Scale and Monopoly Power Exist with Network

question 45

Multiple Choice

Why do economies of scale and monopoly power exist with network goods?

• A) Many small firms must develop to serve all of the consumers willing to pay for access to the network good, so their costs are driven down.
• B) Network goods require a group of sellers working together and this cooperation reduces the firms' cost per unit.
• C) Just as the value of a network good decreases to each user as the total number of users increases, so does the long run average cost decrease as output increases.
• D) As the number of people connected to a network increases, the greater the benefits each person gets and the smaller the cost per unit to supply.

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Definitions:

Cash Receipts

The total amount of money, including cash, checks, and credit card payments, received by a business during a given period.

Internal Control Procedures

Processes implemented by a company to ensure integrity of financial and accounting information, promote accountability, and prevent fraud.

GAAP

GAAP stands for Generally Accepted Accounting Principles, which are standardized guidelines and practices for financial accounting and reporting in the U.S.

IFRS

International Financial Reporting Standards, a set of accounting guidelines that provide a global framework for businesses to prepare and disclose their financial statements.