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:

Persistent Vegetative State

A condition of severe brain damage in which a person loses cognitive functions and awareness of the environment while retaining some basic physical functions and cycles of wakefulness.

Brain Death

A medical condition where all functions of the brain have irreversibly stopped, considered legally and medically as death.

Passive Euthanasia

Allowing a dying person to die naturally, without medical intervention, by withholding or withdrawing treatment.

Act of Commission

An action taken intentionally that causes harm or leads to unwelcome circumstances.