Some firms in the technology sector have achieved economies of scale because costs have been reduced by network effects.
Network Effect
A network effect is a phenomena in economics in which the value or utility that a person obtains from a good or service depends on the number of customers of compatible products. Network effects are typically positive, implying that when more users join the same network, a given user derives more value from the product. Adoption of a product by a new user has two effects: it increases the value of the product to all other users and it increases the motivation of other non-users to use the product. Direct and indirect network effects are also possible.
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