Network Goods Have Very Large Economies of Scale

question 11

Multiple Choice

Network goods have very large economies of scale. This means that the fixed cost of a network good is ____ and the marginal cost is _____.

• A) large; large
• B) large; small
• C) small; large
• D) small; small

---

Definitions:

Snob Effect

Negative network externality in which a consumer wishes to own an exclusive or unique good.

Bandwagon Effect

Positive network externality in which a consumer wishes to possess a good in part because others do.

Network Externalities

Benefits or detriments to a product's value that result from the number of users the product has.

Negative Network Externalities

Adverse effects on a user of a product or service because the number of other users is too large or incompatible in some way.