A network effect exists whenever
A) a firm's willingness to produce a particular good or service is influenced by the costs of inputs it must utilize in order to manufacture the item.
B) a consumerʹs willingness to purchase a particular good or service is influenced by how many others also buy or have bought the item.
C) a firm's willingness to purchase a particular factor of production depends on the other types of inputs it utilizes to manufacture an item.
D) a consumer's willingness to purchase a particular good or service is influenced by the prices of other complementary or substitute items.

Question

Quizplus · Accepted Answer

A network effect refers to the increased value or utility that a product or service gains as more people use it. This means that a consumer's willingness to purchase a particular good or service is influenced by how many others also buy or have bought the item. This creates a positive feedback loop where more users attract even more users, further increasing the value of the product or service.

A Network Effect Exists Whenever