Question

1. Netflix 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

   		volume synergies.
   		size effects.
   		economies of scale.
   		location economies.
   		captured savings.

2. Which of the following functions creates a perception of superior value in the minds of consumers by solving consumer problems and by supporting them after they have purchased the product?

   		logistics
   		marketing and sales
   		human resources
   		customer service
   		production

Answer 1

1. Owing to the huge demand and large number of customers, Netflix is able to not only bear the huge fixed cost by spreading it across its consumer base but also earn great profit as a result. This economic phenomenon of earning higher profits by means of reducing the cost when the scale of operation is huge comes under the premises of economies of scale. Thus, option 3. economies of scale is correct.

2. The after sale services or customer services are a means of establishing and maintaining the company's goodwill by means of solving the consumer problems and supporting them after the purchase. Thus, option 4. customer service is the correct answer.