When a firm produces an information product the initial or fixed costs are . Con

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When a firm produces an information product the initial or fixed costs are . Consequently the average fixed cost and average total cost as the volume of output increases. Since most of the costs are the initial fixed costs of development, once the product is developed, the cost of producing more units of the product are typically low and . In this case, then, the low and constant marginal cost is the average cost. In the firm set the price, or average revenue, of the product equal to the marginal cost, the firm would have since the marginal cost is the average cost.

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