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Situation #1 Assume that you have hired three executives to run your company each with a different job. All are equally productive and each can do the other person’s job if necessary. Assume that the first executive’s contribution to the company is worth $1,000,000 and is assigned to this task; the second one is worth $800,000 and the third one is worth $500,000.
-Referring to Situation #1 suppose that you decide that you have to fire the first and the third executive without hiring any replacements. What would be the opportunity cost of the second executive's work? Explain why your answer is not the same as in the question above.
External Benefits
External benefits refer to the positive effects or advantages that a product or activity imparts on individuals or society who are not directly involved in the production or consumption of the good.
Network Externalities
The effect on a user of a product or service that results from an increase in the number of other users of the same or compatible products or services.
Natural Monopolies
Market conditions where a single firm can supply a good or service more efficiently than any competitor due to economies of scale, hence dominating the market.
Positive Feedback
Put simply, success breeds success, failure breeds failure; the effect is seen with goods that are subject to network externalities.
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