CFA Level I · CFA Level I Exam · Business Models
A company operates an online marketplace connecting independent drivers with passengers, owns no vehicles, and earns a commission on each ride. Its value increases as more drivers and passengers join. This feature is best described as:
The feature is best described as network effects. On a two-sided platform, each added driver or passenger raises the platform's value to the other side, which attracts more users. Economies of scope and operating leverage concern costs, not growing user value.
- Aeconomies of scope
- Bnetwork effectsCorrect
- Coperating leverage
Explanation
When each additional user makes the platform more valuable to other users, the firm benefits from network effects. Economies of scope relate to cost savings from producing multiple products, and operating leverage relates to fixed cost structure.
Did you get it right without looking?
One question tells you little. A timed set on Business Models shows your real accuracy, how long you take and where you lose marks.
More Business Models questions
- An online marketplace connects independent sellers with buyers, takes a commission on each transaction, and becomes more valuable to each bu…
- A retailer adds a marketplace where independent sellers list products on its platform, earning a commission without holding inventory. This …
- A business model describes how a company plans to create value for its customers and capture value for its owners. Which of the following is…
- A long-established camera film manufacturer sees demand collapse as smartphones replace its products, and it has no digital offering. This s…
- An analyst reviews a subscription software firm that has shifted from perpetual licences to annual subscriptions. In the first year after th…
- A manufacturer adopts a sustainability-focused business model by redesigning products so used units are returned, refurbished and resold. Co…