The average-cost curves (AVC)of physical products and digital products
A) are different because the AVC of digital products declines as quantity increases forming an L-shape, while the AVC of physical products is U-shaped.
B) are both U-shaped.
C) are both L-shaped.
D) are different because the AVC of physical products declines as quantity increases forming an L-shape, while the AVC of digital products is U-shaped.

Question

Quizplus · Accepted Answer

The average cost curve for digital products typically declines as quantity increases, due to the nature of digital goods having very low or negligible marginal costs after the initial product is developed. This results in an L-shaped curve. In contrast, physical products often have a U-shaped average cost curve due to economies of scale at lower levels of production and increasing costs at higher levels of production due to factors like labor and resource limitations.

The Average-Cost Curves (AVC)of Physical Products and Digital Products