Chat with AIExam 13: Strategy in Networked Industries
Explain why some industries display decreasing returns while others exhibit increasing returns.
(29) 
Answered by Examlex AI CopilotThe phenomenon of industries displaying decreasing returns or increasing returns is largely influenced by the nature of the production process within each industry.
Industries that display decreasing returns typically operate in a way that as more inputs (such as labor, capital, or materials) are added to the production process, the increase in output becomes less and less. This could be due to limited resources, inefficiencies in production, or diminishing marginal returns. Examples of industries that may display decreasing returns include agriculture, mining, and certain manufacturing processes.
On the other hand, industries that exhibit increasing returns typically benefit from economies of scale, technological advancements, or other factors that lead to a more-than-proportional increase in output as more inputs are added to the production process. This can result in lower average costs and higher profitability. Industries such as technology, software development, and certain service industries may experience increasing returns due to the nature of their production processes.
Overall, the reasons for industries displaying decreasing or increasing returns are complex and multifaceted, often involving a combination of factors related to resource availability, technological innovation, market demand, and operational efficiencies.
Why are high-technology industries likely to show increasing returns?
(43) 
VerifiedC
Which network had, but lost, the lead in number of U.S. visitors between May 2005 and May 2006?
(38) VerifiedC
Which network had the greatest increase in U.S. visitors from May 2005 to May 2006?
(35) Complementary products are used along with the focal product and increase a product's value.
(43) Networked industries account from the majority of revenue of what percentage of the top 100 companies?
(36) What is a situation called in which the purchase of a product by a new customer increases its value to existing customers?
(32) An example of direct network effects is when the value of a DVD player increases with the number of movies that you can watch on it.
(37) According to Metcalfe's law if you have a network of 10 users and you add another, how much have you increased the value to the users?
(30) For start-ups in an industry based on increasing returns, bootstrapping is a very effective way of raising the required funds.
(27) Which of the following firms is least likely to have increasing returns?
(37) How was eBay able to remain ahead of its competition as an Internet auction house?
(33) What was Palm Computing attempting to exploit by creating a beaming capability that allowed information to be transferred between Palm PDAs?
(43) If you operate in an industry based on increasing returns you should start small and build over time.
(47) What is most likely to occur in an industry based on increasing returns?
(43) One reason industries experience increasing returns when upfront costs are low and marginal costs are high is because unit costs drop dramatically as volume increases.
(38) In general, what is required in increasing return industries in order to be successful?
(36) Explain how firms can use network effects to their strategic advantage.
(35) Hewlett-Packard uses razor-razor blade pricing by selling its printers at a loss to get customers to purchase them and make profits off the sale of ink cartridges.
(45) 
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