Why Does Network Externality Arise

question 59

Multiple Choice

Why does network externality arise?

• A)Each additional unit of a good sold reduces the value of the previously sold units.
• B)As more and more units of a good are produced,the average cost declines.
• C)Consumption of a good by one user does not affect the consumption of subsequent users.
• D)The firms enjoy economies of scale in the long run.
• E)Each additional unit of the good sold increases the value of the previously sold units.

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Definitions:

Corporate Form

A legal structure of organization designated to conduct business, which can limit the liability of shareholders and associates with various tax rules.

Taxes

Mandatory financial charges imposed by governments on individuals, corporations, and transactions.

Secondary Market

A marketplace where investors buy and sell securities they already own, which were previously issued in the primary market.

Common Shares

Common Shares represent ownership interests in a corporation, granting holders voting rights and a share in the company's profits through dividends and capital appreciation.