Why are marginal costs typically low for a network good?
A) Fixed costs are high and variable costs are low.
B) Variable costs are high and fixed costs are low.
C) Total costs rise faster than variable costs as output increases.
D) The demand curve is upward sloping at low output levels.

Question

Quizplus · Accepted Answer

Fixed costs are high and variable costs are low for a network good, meaning once the initial investment is made (e.g., in infrastructure or platform development), additional users can be added at relatively low cost, leading to low marginal costs.

Why Are Marginal Costs Typically Low for a Network Good