Why Might a Profit-Maximizing Firm Producing a New Product with Network

question 16

Multiple Choice

Why might a profit-maximizing firm producing a new product with network externalities want to give its product away for free?

• A)To lock customers in then raise prices at a later date.
• B)Although this practice loses money, it can get the firm valuable publicity.
• C)By building market share, the product becomes much more valuable and the firm can make money by offering a premium version of the product for sale.
• D)The product becomes a more valuable place to advertise if it doesn't cost anything.
• E)A profit-maximizing firm would never give its product away for free.

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Definitions:

Fall Turnovers

The annual mixing of lake waters driven by temperature changes, encouraging nutrient redistribution and oxygen circulation.

Aquatic Organisms

Living beings that inhabit water environments, ranging from freshwater to marine ecosystems.

Decomposition

The process by which organic substances are broken down into simpler forms of matter, often involving the action of bacteria and fungi.