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I don't have much experience using lightning, but for what I've seen using a lightning component as a top level of the application seems to be much more useful than using an actual standalone lightning app as it can be placed as a tab or an action and include toasts. So my question is: is there an advantage in using an app as the top level component in my bundles or should I keep using lightning components and forget about standalone apps?. Salesforce documentation that I have seen doesn't provide much of an insight on this.

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Lightning Apps are used to create standalone applications that can be used outside of the Lightning Experience. They're also required if you want to use Lightning Out (e.g. to use Lightning on another website, in Visualforce, etc). Generally speaking, you want to be using Lightning Components, because they can be reused everywhere (e.g. App Builder, Quick Actions, other components, Lightning Applications, etc...). Typically, I will create a Lightning App for testing my components, so I don't have to go through the process of building a Lightning Page or other configuration. I'd say that Lightning Apps are mostly useful for testing purposes, while Lightning Components are typically more useful in actual production use.

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    Ditto on starting with Lightning Apps when developing a component. Much quicker to iterate than wait for entire Salesforce record detail page to refresh. Must note thot that certain platform (so called one.app container) features are not available in standalone Apps, events such as navigateToSObject or showToast will not work there. – dzh Dec 1 '17 at 22:10

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