Once a product becomes established, network externalities may create ________ costs that make consumers reluctant to buy a new product with better technology.
A)external
B)implicit
C)switching
D)marginal

Question

Quizplus · Accepted Answer

Switching costs refer to the expenses and efforts that a consumer must undertake in order to switch from one product to another. In the case of network externalities, consumers may incur significant switching costs (such as learning how to use a new product, transferring data or contacts, or adjusting to a different interface). Therefore, they may be hesitant to adopt a new product even if it has better technology or performance, because it may not be compatible with their existing network or other users. External costs usually refer to negative impacts or consequences of a product or service that are borne by third parties, not the consumers or producers. Implicit costs are opportunity costs or foregone alternatives that are not directly measurable in monetary terms. Marginal costs are the additional costs or benefits of producing or consuming one more unit of a product or service.

Once a Product Becomes Established, Network Externalities May Create ________