Firms that produce an information product experience short-run economies of operation because

Question

Quizplus · Accepted Answer

Firms that produce an information product typically have high fixed costs and low variable costs. As output increases, the fixed costs can be spread over a greater number of units, resulting in a declining average total cost. This means that the firm experiences short-run economies of operation, where the cost of producing and selling the product declines as output increases. The average variable cost curve may not necessarily be U-shaped in this case.

Firms That Produce an Information Product Experience Short-Run Economies of Operation