What effect does a network externality have on the market for a product? if a network externality is present for a product, then a. consumers may be more likely to buy the product because it is more useful. b. consumers may be less likely to buy the product to avoid switching costs. c. producers may be more likely to supply the product to create path dependence. d. producers may be less likely to supply the product to avoid market failure. e. producers may be less likely to supply the product because it is less unique?

The term network externality is used in economics to describe a situation in which the usefulness of a product increases with the number of consumers who use it. It is the change in the benefit, derived from a good when the number of other agents consuming the same kind of good changes. 
If a network externality is present for a product, then consumers may be more likely to buy the product because it is more useful.

Explanation:

Year             Cash Flow (A)            Cash Flow (B)

0                      -37,500                      -37,500

1                         17,300                         5,700

2                        16,200                       12,900

3                        13,800                       16,300

4                         7,600                       27,500

1) Using an excel spreadsheet and the IRR function:

IRR project A = 20%

IRR project B = 19%

2) Using the IRR decision rule, Bruin should choose project A.

3) In this case, since the length of the projects is only 4 years, then there should be no problem with the IRR decision rule, but for projects with longer time lengths, the discounts rates might vary and the best option is to use the modified internal rate of return (MIRR). But in this case the NPV of project B is higher, then Bruin should probably project B because it has a higher NPV. The NPV is always more important then the IRR.

4) Again using an excel spreadsheet and the NPV function:

NPV project A = $6,331

NPV project B = $8,139

5) first we must subtract cash flows from A by the  cash flows from B:

1      $11,600

2     $3,300

3    -$2,500

4   -$19,900

then we calculate the IRR = 16%

Bruin should be indifferent between the two projects at a 16% discount rate. That means that at discount rates above 16%, you should choose project A, but at discount rates below 16%, you should choose project B

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