Question 1

Why would a firm choose a lesser known celebrity in its advertising when more famous celebrities are available?

Accepted Answer

The answer of Why would a firm choose a lesser...

Question 2

For a company to convince consumers to use their products repeatedly, they must:

Accepted Answer

To encourage repeated use, consumers need to understand and appreciate the benefits of the product, which will drive their continued interest and loyalty.

Question 3

Monopolistically competitive firms use advertising exclusively to inform customers about the real differences between their products and their competitorsʹ products.

Accepted Answer

Monopolistically competitive firms use advertising not only to inform customers about real differences but also to create perceived differences and brand loyalty.

Question 4

What is the purpose of advertisements that focus on beer drinkers frolicking on the beach?

Accepted Answer

The answer of What is the purpose of advertisements that...

Question 5

The main purpose of hiring the celebrity endorser is to:

Accepted Answer

Celebrity endorsers are often hired to attract attention and encourage customers to try the product for the first time by leveraging the celebrity's influence and appeal.

Question 6

Hiring a more expensive celebrity endorser will always result in higher firm profits.

Accepted Answer

Hiring a more expensive celebrity endorser does not guarantee higher profits as it depends on various factors such as the celebrity's relevance to the target audience, the effectiveness of the marketing campaign, and the overall cost-benefit analysis.

Question 7

If a firm that makes $5 profit per box of cigars pays Rush Limbaugh $1,000,000 to endorse their cigars, then to make the endorsement pay off they must sell at least:

Accepted Answer

To cover the $1,000,000 endorsement cost with a $5 profit per box, the firm must sell 200,000 more boxes ($1,000,000 / $5 = 200,000).

Question 8

When is it a good decision to hire a celebrity endorser of your product?

Accepted Answer

The answer of When is it a good decision to...

Question 9

Recall the Application about advertising campaigns for movies to answer the following question(s).
-Recall the Application. Distributors of movies do not advertise all their movies because:

Accepted Answer

Advertising costs money, and distributors may choose not to advertise all movies to save on these expenses, especially if they believe the movie can succeed without it.

Question 10

Advertising is a waste of money and just drives up costs and thus price to consumers.

Accepted Answer

Advertising can increase demand, build brand awareness, and differentiate products, potentially leading to increased sales and economies of scale, which can offset costs and benefit consumers.

Question 11

Recall the Application about advertising campaigns for movies to answer the following question(s).
-Recall the Application. Distributors of movies advertise some new releases, but not others. The movies they advertise are those they expect to:

Accepted Answer

Distributors advertise movies they expect to be appealing and generate a lot of "buzz" or word of mouth advertising to maximize their reach and success.

Question 12

When a few firms sell similar products in a market, the market structure is most likely to be:

Accepted Answer

When a few firms sell similar products in a market, the market structure is most likely to be an oligopoly. An oligopoly market is characterized by a small number of large firms that dominate the market and have significant influence over the price and output. Examples of oligopolies include the automobile industry and the smartphone industry.

Question 13

If a firm that makes $100 profit per pair of shoes pays LeBron James $2,000,000 to endorse their basketball shoes, then to make the endorsement pay off they must sell at least:

Accepted Answer

To cover the $2,000,000 endorsement cost with a $100 profit per pair, the firm must sell 20,000 more pairs of shoes ($2,000,000 / $100 = 20,000).

Question 14

Why might a firm pay a celebrity to endorse its product?

Accepted Answer

The answer of Why might a firm pay a celebrity...

Question 15

Advertising can lead to more competition and lower prices for consumers.

Accepted Answer

Advertising can increase market competition by informing consumers about different products, leading to more choices and potentially lower prices as companies compete for customers.

Question 16

Advertising can create an image about a product inducing people to try the product.

Accepted Answer

Advertising often uses persuasive techniques to create a favorable image or perception of a product, which can influence consumer behavior and encourage them to try it.

Question 17

When there are just a few firms in the industry, the industry structure is most likely to be:

Accepted Answer

An oligopoly market is characterized by a small number of firms in the industry, where each firm has significant market power and can influence the market price. This situation is more likely to occur when there are just a few firms in the industry. Perfect competition requires a large number of small firms, while a monopoly market has only one firm. A natural monopoly market is a type of monopoly where one firm can produce the entire output of the market at a lower cost than two or more firms. This is not necessarily dependent on the number of firms in the industry.

Question 18

Recall the Application about advertising campaigns for movies to answer the following question(s).
-Recall the Application. Distributors of movies advertise some but not others. Distributors advertise a movie to signal to movie goers that the movie is:

Accepted Answer

Distributors advertise movies to signal that they are appealing and likely to generate additional "buzz" or word-of-mouth advertising, which can enhance the movie's success.

Question 19

The four-firm concentration ratio measures the:

Accepted Answer

The four-firm concentration ratio measures the percentage of total output in a market produced by the four largest firms. It is an indicator of market power and can be used to determine the level of competition within an industry.

Question 20

When a celebrity is endorsing a product, it is usually because the celebrity is enthusiastic about the product.

Accepted Answer

Celebrities often endorse products due to contractual agreements and financial incentives, not necessarily because they are personally enthusiastic about the product.

Quiz 8: Market Entry, Monopolistic Competition, and Oligopoly