Use the following to answer question:
Figure: Demand and Marginal Revenue
-(Figure: Demand and Marginal Revenue)Use Figure: Demand and Marginal Revenue.The figure refers to a software upgrade.The producer incurred fixed costs of $10 million to produce the upgrade;the marginal cost of allowing consumers to download the upgrade is zero.What is the efficient price of the upgrade?
A)$0
B)$50
C)$75
D)$100

Question

Use the following to answer question:
Figure: Demand and Marginal Revenue 
-(Figure: Demand and Marginal Revenue)Use Figure: Demand and Marginal Revenue.The figure refers to a software upgrade.The producer incurred fixed costs of $10 million to produce the upgrade;the marginal cost of allowing consumers to download the upgrade is zero.What is the efficient price of the upgrade?
A)$0 
B)$50 
C)$75 
D)$100

Quizplus · Accepted Answer

The efficient price of the upgrade is where the marginal cost equals the marginal benefit. Since the marginal cost of allowing consumers to download the upgrade is zero, the efficient price is also $0. This ensures that all consumers who value the upgrade at more than $0 can access it, maximizing total welfare.

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