Question

Amazon Prime incurs a huge fixed cost to obtain streaming rights to movies and television programs. However, it is able to spread this cost over a large number of subscribers that results in a cost-savings phenomenon referred to as

Answer 1

Answer: Economies of scale

Explanation: Amazon Prime being able to spread its huge fixed cost over a large number of subscribers resulting in cost-savings is described by the phenomenon referred to as economies of scale. Economies of scale refers to the reductions in unit cost achieved by producing large volumes of a product that helps spread incurred costs. An increase in the scale of the firm causes a decrease in the long run average cost of each unit.