(Figure: Market Equilibrium for a Network Good) When P =

question 190

Multiple Choice

(Figure: Market Equilibrium for a Network Good) When P = MC, where will market equilibrium occur?

• A) It will occur at point d because at point b, network effects are strong enough to continue to induce more buyers to purchase the product.
• B) It will occur at point b because MC = MR at that point, so the market will stabilize when it reaches point b.
• C) It can occur at either point b or point d. There are multiple equilibria associated with network goods.
• D) It will occur at point c because price and profits are the highest at c.

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