Netflix Introduced DVD Rentals Via US Mail Whereby Customers Do

question 15

Essay

Netflix introduced DVD rentals via US Mail whereby customers do not have to leave their home to rent movies. They also introduced the concept of no-late fees. Netflix has enjoyed strong profits over the last few years. However, what does economic theory tell us should happen to these profits in the long run and why?

Apply the law of diminishing marginal returns to short-run production scenarios.

Determine the effect of changes in input or output levels on a firm's cost and revenue.

Calculate opportunity costs in different scenarios.

Analyze the characteristics and implications of a natural monopoly.

---

Definitions:

Compounded Semi-Annually

The process of calculating interest on a principal sum and its accumulated interest at two intervals within the year.

Effective Annual Rate

The interest rate on a loan or financial product restated from a nominal rate to an annual rate, taking compounding into account.

Compounded Daily

The process where interest is calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan, on a daily basis.

Compounded Semi-Annually

Interest calculated twice a year on the initial principal and the interest that has been previously accumulated.