Final answer:
Increases in the value of a product or service due to more users are called network effects, which differ from core competencies that refer to a business's main strengths. So, the correct answer is option A.
Step-by-step explanation:
Increases in the value of a product or service that result from a corresponding increase in the number of users are known as network effects. This concept is tied to how certain types of products and services, particularly those in the technology and online platform realms, gain additional value as more people use them. It's different from the traditional concept of economies of scale, which relates to a single firm's production function efficiency increasing as it produces more.
Instead, network effects represent a form of value that emerges because the number of users increases, thereby making the product more attractive to potential new users because the existing user base adds utility or desirability to the product. An example of a network effect can be observed in social media platforms where the more users on the platform, the more valuable the platform becomes because it offers a wider network for social interactions, content sharing, and potential connections.
On the other hand, the term core competency refers to a business's primary area of expertise, its strength that gives it an advantage over competitors. Companies that hone in on their core competencies often perform better than those that try to diversify their products and services too widely. This concept fits into strategic business planning and is key in defining the business's unique selling proposition.
So, the correct answer is option A.