A Network Externality Occurs When

question 193

Multiple Choice

A network externality occurs when

• A)there is production cost savings from being networked with suppliers.
• B)there is production cost savings from being networked with buyers.
• C)the usefulness of a good is affected by how many other people use the good.
• D)the usefulness of a good is affected by celebrities who use the good.

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Definitions:

Direct Material

The raw materials that are used directly in manufacturing a product and can be easily traced to the final product.

Factory Overhead

Indirect costs incurred during the manufacturing process, not including direct materials or direct labor.

Materials

Raw inputs or supplies used in the manufacturing process to produce goods or are consumed during the service delivery.

Labor

The human effort, both physical and mental, used in the production of goods and services.