Question

Present owners of a network good receivegreater benefits as new buyers purchase the good. How do network externalities help a monopoly retain its market power? By exploiting network externalities, a firm can become a natural monopoly. If there are strong network externalities associated with a good, other goods are poor substitutes for it. Goods with network externalities are more likely to receive a government patent.

Answer 1

Answer:

How network externalities help a monopoly retain its market power:

By exploiting network externalities, a firm can become a natural monopoly.

Explanation:

In economics, Network externality describes a situation whereby the demand for a product depends on the demand of other consumers buying that product.  This implies that the value of the product to the consumer is increased because others are joining as buyers.  The present owners of a network product will actually gain more benefits as new buyers purchase the good because the fixed costs of rendering the service or providing the good are not increased with increasing buyers, but remain the same over a relevant range.