What Is a Network Externality

question 193

Multiple Choice

What is a network externality?

• A)It refers to having a network of suppliers and buyers for a good or service.
• B)It refers to lobbying to form a public enterprise.
• C)It refers to a situation in which a product's usefulness increases with the number of people using it.
• D)It refers to a product that requires connection to a network for it to be useful.

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Definitions:

Sequential Method

An approach to cost allocation in which support department costs are allocated to other support and operating departments sequentially, one after another, based on a predetermined order.

Reciprocal Services

Services exchanged between departments within an organization, used in cost accounting to allocate service department costs to producing departments.

Reciprocal Services

Services exchanged between departments within an organization or between companies without direct monetary payment, often valued and accounted for through internal mechanisms.

ABC

An abbreviation for Activity-Based Costing, a method of costing that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.