When there are network effects, a reduction in the number of users will
A) cause negative externalities.
B) cause the price to rise.
C) shift the demand curve to the left by a disproportionately large amount.
D) shift the supply curve to the left by a proportionate amount.

Question

Quizplus · Accepted Answer

Network effects occur when the value of a good or service increases as the number of users increases. A reduction in the number of users will therefore reduce the value of the good or service, causing the demand curve to shift to the left by a disproportionately large amount.

When There Are Network Effects, a Reduction in the Number