Question

Amigo, a matrimonial website, is essentially information intensive. It allows people to create an account for free and post information about themselves on the site. Amigo does not incur much cost to extend its services to new customers. Given this information, Amigo is most likely to:

a. have fixed costs that constitute approximately 80 to 85 percent of total costs.
b. earn very low revenue from additional customers.
c. have variable costs that comprise about 80 to 85 percent of total costs.
d. have extremely high incremental costs.

Answer 1

Amigo, an information-intensive matrimonial website that offers free accounts, is most likely to have fixed costs that make up around 80 to 85 percent of total costs, as additional customer acquisition is low-cost.

Step-by-step explanation:

The matrimonial website Amigo is described as being information intensive and allows people to create accounts for free, which suggests that it operates on a business model that does not incur much cost for adding new customers. Given these characteristics, Amigo is most likely to have fixed costs that constitute a large percentage of its total costs. The correct option is a: the company likely has fixed costs amounting to approximately 80 to 85 percent of its total costs. This seems plausible because a digital platform like a matrimonial website typically requires significant upfront investment in technology, software, and infrastructure, but the cost to serve additional customers is relatively low. As a result, the variable costs associated with each new customer (such as the costs of additional server space, customer support, etc.) would be minimal compared to the fixed costs.