Software development has high fixed costs and marginal costs that are close to zero. What would happen if software firms sold their product for marginal cost?
A) They would have the incentive to produce new software programs.
B) They would produce better software.
C) They would increase their profits.
D) They would not be able to afford their fixed costs and would go out of business.

Question

Quizplus · Accepted Answer

Selling software for marginal cost would not generate enough revenue to cover the fixed costs, which are usually high in software development. Therefore, companies would not be able to afford their fixed costs and would eventually go out of business.

Software Development Has High Fixed Costs and Marginal Costs That