Our old friend Edmund Stench from Chapter 2 has now grown up and is in the business of producing punk rock DVDs.He must choose between selling his DVDs to final consumers, or selling his DVDs to firms that will rent them to the public.Which of the following factors would make rentals more attractive than sales?
A)A large number of people interested in viewing punk rock DVDs
B)Large transaction costs of renting
C)high cost of making DVDs relative to transaction costs of renting
D)A small number of people interested in viewing punk rock DVDs
E)High fixed costs of production

Question

Quizplus · Accepted Answer

This is because if the cost of making DVDs is high relative to the transaction costs of renting, then it would be more economical for Edmund to rent out his DVDs to firms who could rent them to the public. This way, he can still make a profit without having to incur the high production costs.

Our Old Friend Edmund Stench from Chapter 2 Has Now