QQuestionBusiness Management
QuestionBusiness Management
Question:
IP is characterized by development costs and very marginal costs.
Multiple Choice
insignificant; low
significant; low
expensive; high
insignificant; high
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Answer
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Step 1: Identify the correct answer based on the definition of IP (Investment in Product Design) provided.
The correct answer is insignificant; low. This is because the definition of IP states that it has very marginal costs, which implies that the costs are low. Additionally, it is mentioned that there are development costs, but these are characterized as insignificant.
Step 2: Explain the reasoning behind the answer.
The development costs for IP are insignificant because they are only incurred once during the initial design phase. After the product has been designed, the marginal costs of producing each additional unit are very low. This is because the fixed costs of designing the product have already been incurred, and the only additional costs are the variable costs associated with producing each unit. These variable costs, such as materials and labor, are typically low.
Final Answer
This is because the development costs are insignificant and the marginal costs are low.
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