Deck 13: Marketing Decisions: Advertising and Promotion

Question 1

Perfect Shots is company specializing in wedding photos and they have a fixed advertising budget. Perfect Shots advertises on the radio and the television and it costs $5,000 per unit of radio advertising and $14,000 per unit of television advertising. At their current advertising levels, the marginal benefit from radio advertising is $4,800 and the marginal benefit from television advertising is $14,250. To optimally allocate their advertising budget, Perfect Shots should .

A)decrease the amount of advertising in radio and increase the amount of advertising in television
B)increase the amount of advertising in radio and television
C)decrease the amount of advertising in radio and television
D)increase the amount of advertising in radio and decrease the amount of advertising in television

Answer 1

A

Question 2

Franco's Frozen Ice produces Italian flavored ice that is sold in the freezer section of grocery stores. Currently, Franco's does not have a fixed advertising budget and advertises in grocery stores' weekly advertising flyers and on the radio. A unit of advertising in the weekly flyers costs $2,000 and a unit of advertising on the radio costs $5,000. At their current advertising levels, the marginal benefit of advertising in the flyer is $2,500 and the marginal benefit of advertising on the radio is $5,000. Which of the following is true?

A)To maximize profits, Franco's should decrease the amount of advertising in flyers.
B)Franco's is currently maximizing its profits from advertising.
C)To maximize profits, Franco's should decrease the amount of radio advertising.
D)To maximize profits, Franco's should increase the amount of advertising in flyers.

Answer 2

D

Question 3

Pretty Polly produces dresses for little girls. When Pretty Polly's manager sets the change in profit equal to its marginal cost of advertising, Pretty Polly's _ _ profit is maximized.

A)net; net
B)gross; net
C)net; gross
D)gross; gross

Answer 3

B

Question 4

Franco's Frozen Ice produces Italian flavored ice that is sold in the freezer section of grocery stores. Currently, Franco's does not have a fixed advertising budget and advertises in grocery stores' weekly advertising flyers and on the radio. A unit of advertising in the weekly flyers costs $1,500 and a unit of advertising on the radio costs $5,500. At their current advertising levels, the marginal benefit of advertising in the flyer is $1,750 and the marginal benefit of advertising on the radio is $5,000. Which of the following is true?

A)To maximize profits, Franco's should decrease the amount of advertising in flyers and increase the amount of radio advertising.
B)To maximize profits, Franco's should increase the amount of advertising in flyers and decrease the amount of radio advertising.
C)To maximize profits Franco's should increase both the amount of advertising in flyers and the amount of radio advertising.
D)Franco's is currently maximizing its profits from advertising.

Question 5

Franco's Frozen Ice produces Italian flavored ice that is sold in the freezer section of grocery stores. Currently, Franco's does not have a fixed advertising budget and advertises in grocery stores' weekly advertising flyers and on the radio. A unit of advertising in the weekly flyers costs $2,000 and a unit of advertising on the radio costs $6,000. At their current advertising levels, the marginal benefit of advertising in the flyer is $1,500 and the marginal benefit of advertising on the radio is $5,000. Which of the following is true?

A)To maximize profits, Franco's should decrease the amount of advertising in flyers and on the radio.
B)Franco's is currently maximizing its profits from advertising.
C)To maximize profits, Franco's should increase the amount of advertising in flyers, but not change the amount of advertising on the radio.
D)To maximize profits, Franco's should increase the amount of advertising in flyers and on the radio.

Question 6

Perfect Shots is company specializing in wedding photos and they have a fixed advertising budget. Perfect Shots advertises on the radio and the television and it costs $5,000 per unit of radio advertising and $14,000 per unit of television advertising. At their current advertising levels, the marginal benefit from radio advertising is $5,000 and the marginal benefit from television advertising is $14,000. Which of the following is true?

A)To optimally allocate their advertising budget, Perfect Shots should decrease the amount of advertising in radio and television.
B)Perfect shots has optimally allocated their advertising budget, which guarantees they have maximized their profits.
C)To optimally allocate their advertising budget, Perfect Shots should increase the amount of advertising in radio and television.
D)Perfect shots has optimally allocated their advertising budget, but that does not guarantee that they have maximized their profits.

Question 7

Perfect Shots is company specializing in wedding photos and they have a fixed advertising budget. Perfect Shots advertises on the radio and the television and it costs $5,000 per unit of radio advertising and $15,000 per unit of television advertising. At their current advertising levels, the marginal benefit from radio advertising is $4,800 and the marginal benefit from television advertising is $15,250. To optimally allocate their advertising budget, Perfect Shots should .

A)increase the amount of advertising in radio and decrease the amount of advertising in television
B)decrease the amount of advertising in radio and increase the amount of advertising in television
C)decrease the amount of advertising in radio and television
D)increase the amount of advertising in radio and television

Question 8

Pretty Polly produces dresses for little girls. At its current advertising level, Pretty Polly's marginal cost of advertising is $500,000 and their marginal benefit is $750,000. Which of the following is true?

A)The firm should reduce the amount of advertising to increase its net profit.
B)If the firm increases the amount of advertising, its net profits will decrease.
C)The firm should increase the amount of advertising to increase its net profit.
D)The firm is currently maximizing its net profit.

Question 9

Franco's Frozen Ice produces Italian flavored ice that is sold in the freezer section of grocery stores. Currently, Franco's does not have a fixed advertising budget and advertises in grocery stores' weekly advertising flyers and on the radio. A unit of advertising in the weekly flyers costs $2,000 and a unit of advertising on the radio costs $5,000. At their current advertising levels, the marginal benefit of advertising in the flyer is $1,500 and the marginal benefit of advertising on the radio is $5,000. Which of the following is true?

A)To maximize profits, Franco's should decrease the amount of radio advertising.
B)Franco's is currently maximizing its profits from advertising.
C)To maximize profits, Franco's should decrease the amount of advertising in flyers.
D)To maximize profits, Franco's should increase the amount of advertising in flyers.

Question 10

Pretty Polly produces dresses for little girls. At its current advertising level, Pretty Polly's marginal cost of advertising is $500,000 and their marginal benefit is $500,000. Which of the following is true?

A)The firm should increase the amount of advertising to increase its net profit.
B)The firm should reduce the amount of advertising to increase its net profit.
C)The firm is currently maximizing its net profit.
D)The firm should double the amount of advertising.

Question 11

Good Boy Super Treats produces healthy treats for dogs. At its current advertising level, Good Boy Super Treats marginal cost of advertising is $1 million and their marginal benefit is $1 million. Which of the following is true?

A)If the firm increases the amount of advertising, its net profit will increase.
B)The firm should increase the amount of advertising to increase its net profit.
C)If the firm decreases the amount of advertising, its net profit will increase.
D)The firm is currently maximizing its net profit.

Question 12

For a firm with market power, advertising expenditures affect all of the following except which one?

A)marginal cost
B)marginal revenue
C)total cost
D)demand curve

Question 13

For a firm with market power, advertising expenditures affect all of the following except which one?

A)fixed cost
B)total cost
C)demand curve
D)marginal cost

Question 14

Good Boy Super Treats produces healthy treats for dogs. At its current advertising level, Good Boy Super Treats marginal cost of advertising is $1 million and their marginal benefit is $1.2 million. Which of the following is true?

A)The firm is currently maximizing its net profit.
B)The firm should reduce the amount of advertising to increase its net profit.
C)The firm should increase the amount of advertising to increase its net profit.
D)If the firm increases the amount of advertising, its net profits will decrease.

Question 15

Franco's Frozen Ice produces Italian flavored ice that is sold in the freezer section of grocery stores. Currently, Franco's does not have a fixed advertising budget and advertises in grocery stores' weekly advertising flyers and on the radio. A unit of advertising in the weekly flyers costs $1,500 and a unit of advertising on the radio costs $4,500. At their current advertising levels, the marginal benefit of advertising in the flyer is $1,750 and the marginal benefit of advertising on the radio is $5,000. Which of the following is true?

A)To maximize profits, Franco's should increase the amount of advertising in flyers, but not change the amount of advertising on the radio.
B)To maximize profits, Franco's should decrease the amount of advertising in flyers and on the radio.
C)Franco's is currently maximizing its profits from advertising.
D)To maximize profits, Franco's should increase the amount of advertising in flyers and on the radio.

Question 16

Good Boy Super Treats produces healthy treats for dogs. At its current advertising level, Good Boy Super Treats marginal cost of advertising is $1.3 million and their marginal benefit is $1 million. Which of the following is true?

A)The firm should reduce the amount of advertising to increase its net profit.
B)The firm is currently maximizing its net profit.
C)The firm should increase the amount of advertising to increase its net profit.
D)If the firm decreases the amount of advertising, its net profits will decrease.

Question 17

In general, the marginal benefit of advertising as more advertising is purchased because the gross profits from advertising _ _ at a(n)rate.

A)decreases; decrease; decreasing
B)decreases; decrease; increasing
C)increases; decrease; decreasing
D)decreases; increase; decreasing

Question 18

Pretty Polly produces dresses for little girls. If Pretty Polly's advertising campaign becomes more effective, the demand for Pretty Polly's dresses will and Pretty Polly's marginal benefit curve from advertising shifts to the .

A)increase; right
B)increase; left
C)decrease; right
D)decrease; left

Question 19

If a firm spends money on advertising, its gross profit is its net profit.

A)equal to
B)exactly twice
C)less than
D)greater than

Question 20

Perfect Shots is company specializing in wedding photos and they have a fixed advertising budget. Perfect Shots advertises on the radio and the television and it costs $5,000 per unit of radio advertising and $15,000 per unit of television advertising. At their current advertising levels, the marginal benefit from radio advertising is $5,800 and the marginal benefit from television advertising is $14,250. To optimally allocate their advertising budget, Perfect Shots should .

A)decrease the amount of advertising in radio and television
B)increase the amount of advertising in radio and decrease the amount of advertising in television
C)decrease the amount of advertising in radio and increase the amount of advertising in television
D)increase the amount of advertising in radio and television

Question 21

A public good is and .

A)nonexcludable; nonrival
B)excludable; rival
C)excludable; nonrival
D)nonexcludable; rival

Question 22

Which of the following is an example of a public good?

A)a cup of coffee
B)a movie ticket
C)a railroad sign
D)books at a public library

Question 23

To maximize profits, managers should purchase the quantity of advertising that maximizes gross profit.

Question 24

BBQ to Go is a large fast food restaurant chain with franchises located throughout the United States. BBQ to Go's advertising promote the benefits of eating BBQ to Go sandwiches and highlight an individual BBQ to Go location in Asheville, North Carolina.

A)will not; will not
B)will not; will
C)will; will not
D)will; will

Question 25

Icy Treats is a large Italian ice dessert chain with franchises located throughout the United States. Icy Treats' advertising will likely focus on which of the following?

A)promoting a successful Icy Treats location in Memphis, Tennessee
B)promoting Icy Treats locations in a specific state
C)promoting a struggling Icy Treats location in Memphis, Tennessee
D)promoting the enjoyment of eating Icy Treats' icees

Question 26

Icy Treats is a large Italian ice dessert chain with franchises located throughout the United States. Icy Treats' advertising promote the benefits of eating Icy Treats' icees and _ highlight an individual Icy Treats location in Asheville, North Carolina.

A)will; will not
B)will not; will
C)will not; will not
D)will; will

Question 27

The table above shows the current costs for a firm to advertising on the radio, television, and newspaper.
Refer to the table above. If at the current advertising level, A = $10,000, B = $14,500, and C = $8,200, to maximize profit, which of the following should the firm do?

A)The firm should decrease its advertising on the radio and increase its advertising in newspapers.
B)The firm should decrease its advertising on the television and increase its advertising in newspapers.
C)The firm should increase its advertising on the television and decrease its advertising in newspapers.
D)The firm should decrease its advertising on the radio and decrease its advertising in newspapers.

Question 28

Which of the following is an example of a public good?

A)a street light
B)an apple
C)ketchup
D)a car

Question 29

If a firm only has one advertising medium, it maximizes its profit by first setting the marginal benefit from its product equal to its marginal cost of production and then determining the optimal amount to advertise.

Question 30

Dairy Swirls is a soft- serve ice cream chain with franchises located throughout the United States. Dairy Swirls' advertising promote the benefits of eating Dairy Swirls and highlight an individual Dairy Swirls location in Asheville, North Carolina.

A)will; will
B)will not; will
C)will; will not
D)will not; will not

Question 31

The profit-maximizing quantity and price is determined after the optimal amount of advertising is determined.

Question 32

If competitive firms spent money on advertising their product, their profits would decrease.

Question 33

The table above shows the current costs for a firm to advertising on the radio, television, and newspaper.
Refer to the table above. If at the current advertising level, A = $9,800, B = $15,200, and C = $8,000, to maximize profit, which of the following should the firm do?

A)The firm should increase its advertising on the television and decrease its advertising in newspapers.
B)The firm should decrease its advertising on the television and increase its advertising in newspapers.
C)The firm should decrease its advertising on the radio and increase its advertising on television.
D)The firm should decrease its advertising on the radio and increase its advertising in newspapers.

Question 34

It is possible for firms to not maximize profits even if they have optimally allocated their fixed advertising budget.

Question 35

BBQ to Go is a large fast food restaurant chain with franchises located throughout the United States. BBQ to Go's advertising will likely focus on which of the following?

A)promoting the benefits of eating BBQ to Go sandwiches
B)promoting a struggling BBQ to Go location in Denver, Colorado
C)promoting BBQ locations in a specific state
D)promoting a successful BBQ to Go location in Denver, Colorado

Question 36

Which of the following is an example of a public good?

A)any kind of public transportation
B)a box of cookies
C)the subway
D)a lighthouse

Question 37

The table above shows the current costs for a firm to advertising on the radio, television, and newspaper.
Refer to the table above. If at the current advertising level, A = $10,000, B = $15,500, and C = $7,800, to maximize profit, which of the following should the firm do?

A)The firm should decrease its advertising on the radio and increase its advertising in newspapers.
B)The firm should decrease its advertising on the radio and decrease its advertising in newspapers.
C)The firm should decrease its advertising on the television and increase its advertising in newspapers.
D)The firm should increase its advertising on the television and decrease its advertising in newspapers.

Question 38

The table above shows the current costs for a firm to advertising on the radio, television, and newspaper.
Refer to the table above. If at the current advertising level, A = $10,000, B = $15,000, and C = $8,000, to maximize profit, which of the following should the firm do?

A)The firm should decrease its advertising on the radio and increase its advertising in newspapers.
B)The firm has optimally allocated their advertising budget, but that does not guarantee that they have maximized their profits.
C)The firm has optimally allocated their advertising budget, which guarantees they have maximized their profits.
D)The firm should decrease its advertising on the radio and increase its advertising on television.

Question 39

Which of the following is an example of a public good?

A)an ice cream cone
B)a box of bath tissues
C)a public bus
D)street signs

Question 40

The table above shows the current costs for a firm to advertising on the radio, television, and newspaper.
Refer to the table above. If at the current advertising level, A = $9,800, B = $15,000, and C = $8,200, to maximize profit, which of the following should the firm do?

A)The firm should decrease its advertising on the radio and decrease its advertising in newspapers.
B)The firm should decrease its advertising on the radio and increase its advertising in newspapers.
C)The firm should decrease its advertising on the television and increase its advertising in newspapers.
D)The firm should increase its advertising on the television and decrease its advertising in newspapers.

Question 41

Suppose the egg industry is made up of only the three farms above; Happy Chickens, Special Chickens, and Superior Chicken
Refer to the table above. If the cost per unit of advertising is constant at $475, what is the level of advertising per week that maximizes the industry joint profit?

A)4
B)1
C)3
D)2

Question 42

In reference to determining the optimal amount of advertising, managers of trade associations face each of following additional challenges except which one?

A)difficulty in prescribing a fair and practical way to share the cost of advertising across firms
B)the free rider problem
C)difference in the marginal benefits of advertising across firms
D)the challenge of a constant marginal benefit of advertising across firms

Question 43

Suppose the egg industry is made up of only the three farms above; Happy Chickens, Special Chickens, and Superior Chicken
Refer to the table above. If the cost per unit of advertising is constant at $750, what is the level of advertising per week that maximizes the industry joint profit?

A)1
B)3
C)4
D)2

Question 44

In reference to funding industrywide advertising, if the majority of managers free ride, which of the following is likely to occur?

A)The industrywide marginal benefit of advertising will fall below its marginal cost.
B)The industrywide marginal benefit of advertising will exceed its marginal cost.
C)The industrywide marginal benefit of advertising will equal its marginal cost.
D)The industry will maximize its joint profit.

Question 45

The quantity of advertising that maximizes the industrywide joint profit, is the quantity that sets the industry wide marginal benefit equal to the marginal cost.

Question 46

A free- rider is a person or firm that from a good or service .

A)benefits; without paying for it
B)benefits; by paying for it
C)does not benefit; by paying double the price for it
D)does not benefit; by paying for it

Question 47

Suppose the dairy industry is made of up only by the three firms above; Cow Haven, Free Cows, and Happy Cows.
Refer to the table above. If the cost per unit of advertising is constant at $820, what is the level of advertising per week that maximizes the industry joint profit?

A)1
B)4
C)2
D)3

Question 48

If Icy Treats is a large Italian ice dessert chain with franchises located throughout the United States, it is likely that each franchise will have the same advertising marginal benefit schedule.

Question 49

In reference to determining the optimal amount of advertising, managers of trade associations face each of following additional challenges except which one?

A)difference in the marginal benefits of advertising across firms
B)the ability for a firm to benefit from advertising that they did not pay for
C)lack of free riders
D)difficulty in prescribing a fair and practical way to share the cost of advertising across firms

Question 50

In order to fund industrywide advertising, managers of trade associations often try to charge the members that receive a lower marginal benefit from advertising .

A)a high fee
B)the total cost of the advertising
C)a lower fee
D)nothing

Question 51

Suppose the dairy industry is made of up only by the three firms above; Cow Haven, Free Cows, and Happy Cows.
Refer to the table above. If the cost per unit of advertising is constant at $550, what is the level of advertising per week that maximizes the industry joint profit?

A)5
B)3
C)2
D)4

Question 52

Industrywide advertising is an example of a public good.

Question 53

Suppose the egg industry is made up of only the three farms above; Happy Chickens, Special Chickens, and Superior Chicken
Refer to the table above. If the cost per unit of advertising is constant at $600, what is the level of advertising per week that maximizes the industry joint profit?

A)2
B)4
C)3
D)1

Question 54

Suppose the dairy industry is made of up only by the three firms above; Cow Haven, Free Cows, and Happy Cows.
Refer to the table above. If the cost per unit of advertising is constant at $900, what is the level of advertising per week that maximizes the industry joint profit?

A)5
B)4
C)2
D)3

Question 55

A hot dog sold by a street hot dog vendor is an example of a public good.

Question 56

Suppose the dairy industry is made of up only by the three firms above; Cow Haven, Free Cows, and Happy Cows.
Refer to the table above. If the cost per unit of advertising is constant at $675, what is the level of advertising per week that maximizes the industry joint profit?

A)2
B)3
C)4
D)5

Question 57

Industry advertisements work to promote specific brands.

Question 58

In a franchised network in which all managers are required to pay a percentage of their sales to pay for system- wide advertising, there a free- rider problem and it is likely that the system- wide quantity of advertising will be optimal.

A)is; less
B)is not; less
C)is; more
D)is not; more

Question 59

In order to fund industrywide advertising, managers of trade associations often to do all of the following except which one?

A)charge the members that receive a lower marginal benefit, a lower fee
B)base each member's payment on the marginal benefit that the firm will receive from the advertising
C)charge the members that receive a greater marginal benefit, a higher fee
D)set each member's payment equal to the total cost of the advertising

Question 60

Suppose the egg industry is made up of only the three farms above; Happy Chickens, Special Chickens, and Superior Chicken
Refer to the table above. If the cost per unit of advertising is constant at $325, what is the level of advertising per week that maximizes the industry joint profit?

A)4
B)1
C)3
D)2

Question 61

Which of the following advertising statements could be considered greenwashing?

A)"100 percent money back guarantee"
B)"Guaranteed to make you want to dance!"
C)"Made of only recycled materials"
D)"Our lasagne is made with love."

Question 62

All else equal, the the pool of buyers who can be fooled once by false advertising, the profitable it is to falsely advertise.

A)larger; more
B)smaller; more
C)larger; less
D)greater; least

Question 63

All of the following are true regarding false advertising except which one?

A)It can misrepresents the quality of a good or service.
B)It can misrepresents the price of a good or service.
C)It can misrepresents the characteristics of a good or service.
D)It can misrepresent the nature of a good or service.

Question 64

goods are most often greenwashed.

A)Inspection
B)Food products
C)Experience
D)Credence

Question 65

Best Grapes is a new winery that wants to attract new customers. The managers of Best Grapes advertise the following, "Best Grapes: The Best Value Wine Money Can Buy." If Best Grapes wine is really of poor value, this is an example of a(n)_ good.

A)greenwashing; experience
B)falsely advertising; credence
C)falsely advertising; experience
D)greenwashing; credence

Question 66

The potential for profit- increasing false advertising is greatest for which of the following goods?

A)disposable diapers
B)a refrigerator
C)spray window cleaner
D)laundry detergent

Question 67

False advertising likely to be successful with tickets on a new airline because the tickets are an good.

A)is; experience
B)is not; experience
C)is not; inspection
D)is; inspection

Question 68

A box of biodegradable baby diapers is an example of a(n)good and also an example of a(n)good.

A)inspection; experience
B)credence; experience
C)credence; inspection
D)inspection; greenwashed

Question 69

All else equal, false advertising is more prevalent in all of the following types of communities except which one?

A)a college campus
B)a small town with few visitors
C)a resort town
D)a tourist destination

Question 70

Angelo's Calzones is opening a new location in Colorado. To attract new customers, the managers of Angelo's advertise the following slogan, "Angelo's Calzones: The BEST Calzone You Will Ever Eat!" If Angelo's calzones are really of poor quality, this is an example of _ a(n) good.

A)falsely advertising; credence
B)greenwashing; credence
C)greenwashing; experience
D)falsely advertising; experience

Question 71

The potential for profit- increasing false advertising is greatest for which of the following goods?

A)toilet paper
B)paper towels
C)deodorant
D)a home water heater

Question 72

A seller cannot mislead purchasers of a(n)good more than .

A)inspection; once
B)experience; twice
C)inspection; twice
D)experience; once

Question 73

False advertising likely to be successful with a plush stuffed toy sold at retail stores because the stuffed toys are a(n)good.

A)is not; credence
B)is not; inspection
C)is; inspection
D)is; credence

Question 74

False advertising is least likely to be successful with goods.

A)greenwashed
B)experience
C)inspection
D)credence

Question 75

The potential for profit- increasing false advertising is greatest for which of the following goods?

A)spot carpet cleaner
B)a washing machine
C)toothpaste
D)hair shampoo

Question 76

An expensive bottle of balsamic vinegar is an example of an good, and an order of lasagne from Bella's Restaurant is an example of a(n)good.

A)experience; experience
B)experience; credence
C)experience; inspection
D)inspection; inspection

Question 77

False advertising likely to be successful with newly built vacation rental homes on a remote island because the rental homes are a(n)good.

A)is not; credence
B)is; credence
C)is; experience
D)is not; experience

Question 78

Which of the following advertising statements could be considered greenwashing?

A)"Try our pizza; it is the best pizza you will ever taste."
B)"Our product is 100 percent biodegradable."
C)"Our employees love to make pizza for you!"
D)"Only high quality products are used to make our guacamole."

Question 79

Advertising _ have the potential to mislead _ _ buyers about the characteristics of experience goods.

A)does not; greenwashed
B)does; repeat
C)does; first- time
D)does not; first- time

Question 80

A luxury cruise in the United States Virgin Islands is an example of an _ good, and a desk calendar is an example of a(n)_ _ good.

A)inspection; experience
B)experience; inspection
C)experience; credence
D)inspection; credence