The variable part of the equation to estimate costs is the total volume of items that the company produces. To produce 101 or 110 units may not cost you anymore so the additional units have zero cost to produce because all your systems are in place. However, it is complicated. We produce 100 units they have an associated cost. Profit maximization tells us that marginal revenue (MR) should equal marginal cost (MC), but when marginal costs are zero, we produce where marginal revenue is zero. Jeremy Rifkin's book, The Zero Marginal Cost Society, is at times thrilling, at times encyclopedic, and at times possibly hyperbolic. Most zero marginal cost good like apps are not homogeneous, they differ slightly. Constant marginal cost is the total amount of cost it takes a business to produce a single unit of production, if that cost never changes. The equilibrium price and the equilibrium quantity at this equilibrium are OP and OE respectively. $\begingroup$ In the short term companies will be willing to sell even if the price is under the average cost, ... is a reason why it is hard to charge for goods like e-books and apps in the app store. Zero marginal cost production plays tricks with what we know from conventional market situations. It is very well-written, it touches on an incredibly wide variety of modern topics, it builds on an exhaustive set of references, and most importantly it makes you think seriously about the future. Since the cost is the same for every single unit produced, it is considered a constant. Here, total revenue and hence total profits (area OPBE) of the monopolist are maximum. E is the point of monopolist equilibrium, where MC cuts MR from below. Zero marginal cost, keep it simple kiss it to death, in economic terms, it is about analyzing the cost to produce a product or service. While economists have always welcomed a reduction in marginal cost, they never anticipated the possibility of a technological revolution that might bring marginal costs to near zero, making goods and services priceless, nearly free, and abundant, and no longer subject to market forces. (Marginal cost is the cost of producing additional units of a good or service, if fixed costs are not counted.) Figure1 shows the equilibrium of the monopolist, where marginal cost is equal to zero. The Financial Times calls The Zero Marginal Cost Society “a thought-provoking read that pushes some of the most important new technologies to their logical—and sometimes scary—conclusions… the value of this book…doesn't lie in the accuracy of its specific forecasts, but rather in the extrapolations of current trends that enable Rifkin to reach them.

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