Which of the Following Is True of an Information Good

question 42

Multiple Choice

Which of the following is true of an information good or service?

• A) In order to maximize profits, firms should set a high price because information goods are expensive to produce.
• B) The profit-maximizing price should be equal to the average fixed cost of producing the information good.
• C) Information goods are provided for free because the production cost of an information good is zero.
• D) The smaller the number of consumers using an information good, the higher the value obtained by other consumers.
• E) Information goods or services are characterized by high fixed costs but low or negligible marginal costs.

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Definitions:

Compounded Semi-annually

A method of computing interest where the interest is calculated and added to the principal twice a year.

Periodic Interest Rate

The interest rate applied to a loan or investment over a specific period of time, less frequently than annually.

Compounded Monthly

The method of calculating interest where the accrued interest is added to the principal sum each month, leading to interest on interest the following month.

Periodic Rate

Periodic rate is the interest rate applied to a financial product over a specific period, which could be daily, monthly, or quarterly, rather than annually.