What are network effects? Provide an example. What will be an ...

[karen]

What are network effects? Provide an example.
 
  What will be an ideal response?

Question 2

There is little variation in returns on IT investment across firms.
 
  Indicate whether the statement is true or false

[bbburns21]

Answer to Question 1

Network effects refer to the increased value of a product or service that results simply because there are more people using it. A large customer base can be significant because of network effects. The value of Facebook, for example, is low if you can only connect a few people. But the more people who use that social network, the more valuable it becomes to everyone.

Answer to Question 2

FALSE