The external benefit from a network externality is measured as the
A) horizontal distance between the private and social demand curves.
B) vertical distance between the private and social demand curves.
C) horizontal distance between the private and social supply curves.
D) vertical distance between the private and social supply curves.

Question

Quizplus · Accepted Answer

The external benefit from a network externality is measured as the vertical distance between the private and social demand curves. This is because the social demand curve reflects the total benefit to society (including external benefits), while the private demand curve reflects the benefit to individual consumers without considering the external benefits. The vertical distance between these curves at any given quantity represents the external benefit at that quantity.

The External Benefit from a Network Externality Is Measured as the