A Network Externality Exists

question 179

Multiple Choice

A network externality exists

• A)in the television industry
• B)outside the television industry
• C)whenever an increase in the size of a network increases its value to current and potential members
• D)whenever an increase in the size of a network increases its average total cost of production
• E)whenever an increase in the size of a network increases its total cost of production

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Definitions:

Total Cost Curve

A graph that depicts how the total costs of production vary with the level of output.

Economic Profit

A measure of performance that captures the surplus generated from business activities after accounting for both explicit and implicit costs.

Shuts Down

A temporary or permanent cessation of operations by a firm when it is not covering variable costs of production or facing insolvency.

Total Cost

The entirety of spending on the production of products or services, incorporating both costs that are constant and those that can change.