Question

On-premise computing incurs ________ costs; organizations

typically ________ use their infrastructure to its full capacity.
Group of answer choices
1. fixed; do not variable;
2. do not variable;
3. do
4. fixed; do

Answer 1

On-premise computing is associated with fixed costs and is characterized by underutilization, where organizations typically do not utilize their infrastructure fully.

Step-by-step explanation:

On-premise computing incurs fixed costs; organizations typically do not use their infrastructure to its full capacity. This is because fixed costs are associated with the capital and infrastructure that do not change in the short run, regardless of the level of production. Examples of fixed costs include rent on factory or retail space, cost of machinery or equipment, and expenses like advertising or research and development. As the amount of fixed costs can vary across different lines of business, firms like internet companies might have high fixed costs but low marginal costs, enabling them to serve a large customer base with relatively flat variable costs until a certain threshold of service capacity is reached.