One of the dynamics of digital goods is that the costs of production for digital goods typically remain constant regardless of the scale of production.

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Consider the statement about digital goods: do the production costs stay constant as you scale up production?
Option 1: True. The claim that production costs remain constant regardless of scale would ignore how costs behave in digital goods. In practice, digital goods often have high fixed or upfront costs (development, platform setup, licensing, etc.), but the marginal cost of producing an additional unit is typically very small. This means total costs rise slowly with volume, while average cost per unit tends to decrease. Saying costs remain constant across scales misrepresents the real cost structure, because total costs are not perfectly flat as quantity increases.
Option 2: False. This option aligns with economic reality for digital goods. While marginal costs per extra copy are near zero, there are still fixed costs that do not disappear with scale, and there can be variable costs like bandwidth, hosting, or support that grow with usage. Therefore, total costs do not stay exactly constant as production scales; they usually rise by the fixed costs plus any variable costs, and average costs typically decline as volume increases. The claim that costs are constant ignores these dynamics and is inaccurate.

MIS 446, Section 001: It Bus Strat (22511--UP---P-MIS-----446-------001-) MIS446Q2

One of the dynamics of digital goods is that the costs of production for digital goods typically remain constant regardless of the scale of production.

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MIS 446, Section 001: It Bus Strat (22511--UP---P-MIS-----446-------001-) MIS446Q2

One of the dynamics of digital goods is that the costs of production for digital goods typically remain constant regardless of the scale of production.

View Explanation

Log in for full answers

Similar Questions

An assumption of the BECOMP model is:

When the average total cost curve is downward sloping, what must be true about the marginal cost curve?

Refer to the accompanying graph to answer the next question. The firm is experiencing gains from specialization up to what level of output along the marginal cost curve?

Part 1In the​ figure, the marginal cost of the last unit produced by the profit maximizing firm is A. ​$15. B. ​$10. C. ​$5. D. ​$20. Part 1

A company produces a popular brand of cookies. In the short run, the size of its factory and equipment are fixed, but it can hire more or fewer workers. Suppose the company observes that its marginal product of labor is increasing. What will happen to its marginal cost of production?

When a firm increased its output by one unit, its AC rose from $45 to $50. This implies that its MC after the increase is

More Practical Tools for Students Powered by AI Study Helper

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Part 1In the figure, the marginal cost of the last unit produced by the profit maximizing firm is A. $15. B. $10. C. $5. D. $20. Part 1