In many high-tech industries, the fixed costs of developing a product are very high, but the costs of producing one extra unit of the product are very low.

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This is known as the high fixed cost and low marginal cost business model, and it is common in industries such as software development, pharmaceuticals, and aerospace. The initial costs of research and development, equipment, and manufacturing facilities can be very high, but once these fixed costs have been incurred, the marginal cost of producing additional units is often quite low. This allows companies to achieve economies of scale and lower their average cost per unit, which can increase profitability and competitiveness.

In Many High-Tech Industries, the Fixed Costs of Developing a Product