Netflix introduced DVD rentals via US Mail whereby customers do not have to leave their home to rent movies. They also introduced the concept of no-late fees. Netflix has enjoyed strong profits over the last few years
However, what does economic theory tell us should happen to these profits in the long run and why?
In the long run these profits will probably be competed away. Blockbuster has already responded by offering the same service. In addition, Blockbuster customers can return their movies to one of their retail locations in addition to mailing them back.
You might also like to view...
Deviations of the actual unemployment rate away from the natural rate are
A) the monetary rule. B) cyclical unemployment. C) structural unemployment. D) frictional unemployment.
When there is a threat of inflation in the economy, the Fed can ________ the federal funds rate to ________ aggregate demand and ________ the price level
A) raise; decrease; decrease B) lower; increase; increase C) lower; increase; decrease D) raise; increase; decrease E) raise; decrease; increase