The term "network externality" refers to a barrier to entry that exists because:
A) the value of the product to a consumer depends on the number of consumers using the product.
B)a group of firms has divided the market into interconnected shares controlled by each firm.
C)several firms are able to network with each other and control the market.
D)consumers are unable to network, i.e., cooperate, with each other to control market price.

Question

Quizplus · Accepted Answer

Network externality refers to a situation where the value of a product increases as more consumers use it. This creates a barrier to entry for new firms because they would have a hard time attracting customers away from established firms with a larger consumer base.

The Term "Network Externality" Refers to a Barrier to Entry