When a Consumer's Willingness to Buy a Good or Service

question 98

Multiple Choice

When a consumer's willingness to buy a good or service is influenced by the number of people who have purchased that good or service, this is called

• A) a switching cost.
• B) an opportunity cost.
• C) a network effect.
• D) an advertising gimmick.

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Definitions:

Network Effects

The phenomenon whereby a product or service gains additional value as more people use it, enhancing its appeal and utility to new and existing users.

Economies Of Scale

Cost advantages that a business obtains due to expansion, seen in the form of reduced costs per unit as output increases.

Profit-Maximizing

The method or approach of adapting manufacturing and selling activities to secure the maximum potential profit.

Competitively Organized Industry

An industry characterized by many firms competing against each other in a market to sell their products.