Albatross Software Has Two Main Products: WindSong Is a Program

question 47

Multiple Choice

Albatross Software has two main products: WindSong is a program that can be used to edit audio files and SunBurst is a program that can be used to edit digital photos. The two major types of customers are small businesses and home users. The small business customers have a reservation price of $300 for WindSong and $450 for SunBurst. The home users have a reservation price of $100 for WindSong and $125 for SunBurst. Which of the following statements is true?

• A) Bundling the two software products is not likely to be profitable because the marginal cost of producing software is positive by very small.
• B) Bundling the two software products is not likely to be profitable because the consumer demands are homogeneous.
• C) Bundling the two software products is likely to be profitable because the demands are negatively correlated.
• D) Bundling the two software products is not likely to be profitable because the demands are positively correlated.

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Definitions:

Market Price

The current price at which an asset or service can be bought or sold in the market.

Marginal Cost

The increase in total production costs resulting from the production of one additional unit of a product or service.

Downstream Division

Part of a company involved in the final processing, distribution, or selling of a product.

Intermediate Good

A product used in the manufacturing process to produce a final good or finished product, not sold directly to consumers.