Question

How is the cost structure in a software firm (and many other IT firms) different from traditional firms (fixed, average, and marginal cost)? Draw a diagram to illustrate a traditional cost structure and another to illustrate the cost structure in an IT firm.

b. How does that impact the price and quantity decisions for technology firms relative to traditional firms, and how might it lead to market power?

c. What is "combinatorial innovation?" How and why do you think the process of combinatorial innovation has progressed faster in IT (& software in particular) than many other industries? How might it impact the cost structure of an IT firm?​

Answer 1

The cost of producing a firm’s output depends on how much labor and physical capital the firm uses. A list of the costs involved in producing cars will look very different from the costs involved in producing computer software or haircuts or fast-food meals. However, the cost structure of all firms can be broken down into some common underlying patterns. When a firm looks at its total costs of production in the short run, a useful starting point is to divide total costs into two categories: fixed costs that cannot be changed in the short run and variable costs that can be changed.

Answer 2

Answer:

good morning

have a nice day