Which of the following statements about network economics is not true?
A) eBay is an example of a business model that is based on the principle of network economics.
B) The law of diminishing returns does not always apply to every situation.
C) From a network economics perspective, the value of a community of people grows as the number of participants in the community increases.
D) Information technology can be strategically useful from a network economics perspective.
E) In network economics, the marginal cost of adding new members to the network is higher than the marginal gain.

Question

Quizplus · Accepted Answer

In network economics, the marginal cost of adding new members to the network is typically lower than the marginal gain. This is because the more members a network has, the more valuable it becomes, and therefore the more attractive it is for new members to join. Network effects generally create a positive feedback loop where more users produce more value, which in turn attracts even more users. Thus, the correct statement would be "In network economics, the marginal cost of adding new members to the network is lower than the marginal gain."

Which of the Following Statements About Network Economics Is Not