The effect of positive network externalities can be so powerful that it may even:
A)create a natural monopoly.
B)transfer deadweight loss to surplus.
C)encourage competition and increase efficiency.
D)None of these statements is true.

Question

Quizplus · Accepted Answer

Positive network externalities occur when the value of a product or service increases as more people use it. This can often create a natural monopoly, where one company dominates the market because consumers are locked in due to the positive network externalities of the product. As more people use a product, the network effect grows stronger, making it more valuable to be a part of that network, ultimately creating a barrier to entry for other potential competitors.

The Effect of Positive Network Externalities Can Be So Powerful