Which statement is TRUE regarding network goods?
A) Producers of network goods typically sell their product at a price below marginal cost.
B) Competition among companies producing network goods drives the price down to equal marginal cost.
C) Network goods typically sell at a price higher than marginal cost.
D) Marginal cost always equals average cost for network goods.

Question

Quizplus · Accepted Answer

Network goods typically have high fixed costs and low variable costs. As a result, the price of network goods is often set above the marginal cost to recover fixed costs and make a profit. This is known as price discrimination, where consumers who value the network good more are willing to pay a higher price. Therefore, option C is the correct statement. Options A, B, and D are incorrect because they do not accurately describe pricing behavior for network goods.

Which Statement Is TRUE Regarding Network Goods