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:

Price/Earnings Ratio

A valuation metric for evaluating the relative worth of a company, calculated as market value per share divided by earnings per share.

Market Price Per Share

This is the current price at which a single share of a company's stock can be bought or sold in the market.

Return on Equity

A measure of a corporation's profitability, calculated as net income divided by shareholder's equity.

Debt-Equity Ratio

A financial metric used to evaluate a company's leverage, by calculating the division of its total debts by the equity of its investors.