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Q. 25.15

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Economics Today
Found in: Page 576

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Short Answer

Discuss the special characteristics of an information product, and explain the implications for a producer's short-run average and marginal cost curves- In addition, explain why having a price equal to marginal cost is not feasible for the producer of an information product.

As a result, the average total cost curve slopes from left to right. Simultaneously, the average variable cost equals the marginal cost.

As a result, if the price equals marginal cost, it is always less than the average total cost. It causes the producer to incur a short-term economic loss.

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Step by Step Solution

Step 1:Givem data

how this affects a producer's short-run average and marginal cost curves. - having a price equal to marginal cost is not feasible for an information product producer.

Step 2:The fixed cost of an informational product 

The fixed cost of an informational product is extremely high, while the average variable cost is very low per unit.

As a result, the average total cost curve slopes from left to right. Simultaneously, the average variable cost equals the marginal cost.

Step  3:The marginal cost of an informational product 

The marginal cost of an informational product is less than the average total cost. As a result, if the price equals marginal cost, it is always less than the average total cost. It causes the producer to incur a short-term economic loss.

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