3. Explain the nature of the network externality in each of the following cases.
A new type of credit card, called Passport
When a large number of other people use Passport credit cards, then any one merchant is more likely to accept the card. So the larger the customer base, the more likely a Passport card will be accepted for payment.
A new type of car engine, which runs on solar cells
When a large number of people own a car with a new type of engine, it will be easier to find a knowledgeable mechanic who can repair it.
A website for trading locally provided goods and services
When a large number of people use such a website, the more likely it is that you will be able to find a buyer for something you want to sell or a seller for something you want to buy.