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.

---

Definitions:

Unfair Labor Practice

Actions by employers or unions that violate workers' rights or union agreements, as defined under labor laws such as the National Labor Relations Act in the U.S.

National Labor Relations Act

A foundational law in the United States enacted in 1935 to protect the rights of employees and employers, to encourage collective bargaining, and to curtail certain private sector labor and management practices that can harm the general welfare of workers, businesses, and the U.S. economy.

Market-Based Economic Theory

An economic perspective that emphasizes the efficiencies generated by free markets, minimal governmental intervention, and competition driving innovation and productivity.

Property Rights

Legal rights to possess, use, and distribute property.