A Significant Downside to Network Externalities Is That

question 131

Multiple Choice

A significant downside to network externalities is that

• A)there may be large switching costs to consumers of changing products so that consumers end up using products with inferior technologies.
• B)firms may network with unethical suppliers or distributors.
• C)the costs of using celebrity endorsements may be very high.
• D)there may be large switching costs to firms changing technologies.

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Definitions:

Elasticity of Demand

The degree to which the quantity demanded of a good or service varies with its price. Generally, a high elasticity indicates that demand is sensitive to price changes.

Inverse Demand Curve

Another term for the inverse demand function, it graphically represents how price depends on the quantity demanded, illustrating the relationship inverse to the demand curve.

Total Revenue

The total amount of money received by a company from selling goods or services before any expenses are deducted.

Inverse Demand Function

A mathematical representation that describes the relationship between the price of a good and the quantity that consumers are willing and able to purchase, expressed as price as a function of quantity demanded.