Question 1

Discuss the role of product differentiation and advertising in monopolistic competition.

Accepted Answer

The answer of Discuss the role of product differentiation and...

Question 2

Draw a graph that shows the impact on a firm's profit when it increases spending on advertising and the increased advertising has no effect on the demand for a firm's product.

Accepted Answer

The answer of Draw a graph that shows the impact...

Question 3

One goal a firm tries to achieve when it advertises a product is to

Accepted Answer

The goal of advertising is to create brand loyalty and differentiate a product from its competitors. If successful, this will make the demand for the product less sensitive to changes in price, thus making the demand curve more inelastic.

Question 4

A firm cannot control all of the factors that allow it to make economic profits.Which of the following is an example of an uncontrollable factor?

Accepted Answer

Input prices are an example of uncontrollable factors as a firm has no control over the prices of raw materials or factors of production. The other options are controllable factors as a firm can control its product differentiation, production cost, and hiring competent managers.

Question 5

If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated, then the demand for each seller's product is

Accepted Answer

When products are strongly differentiated, consumers perceive them as unique, leading to less sensitivity to price changes, making the demand relatively inelastic.

Question 6

Why would an organization as large as the National Football League (NFL)incur large legal expenses to try to prevent bars and restaurants from using their trademarked term "Super Bowl" in their advertising?

Accepted Answer

The answer of Why would an organization as large as...

Question 7

Advertising is the action of a firm that is intended to maintain the differentiation of its product over time.

Accepted Answer

Advertising is not intended to maintain the differentiation of a product over time. Instead, it is intended to create awareness and persuade consumers to purchase the product.

Question 8

A firm that successfully differentiates its product or lowers its average cost of production creates

Accepted Answer

A firm that successfully differentiates its product or lowers its average cost of production creates value for its customers.

Question 9

In the highly competitive fast-food restaurant market, brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

Accepted Answer

Brand name fast-food restaurants have invested heavily in their brand and reputation, and any negative consequences resulting from unsanitary conditions would not only drive away customers but also result in legal and financial consequences. Therefore, they have a strong profit incentive to maintain high sanitation standards.

Question 10

What is the difference between the terms "marketing" and "advertising"?

Accepted Answer

The answer of What is the difference between the terms...

Question 11

Article Summary
In Colorado, recreational marijuana is legal but smoking in hotels is not. Former Wall Street lawyer Joel Schneider found a way around this legal conundrum by opening a bed-and-breakfast (B&B), which he refers to as Bud+Breakfast. In Colorado, B&Bs are considered private property and therefore not subject to the no-smoking laws, and Schneider does not allow guests under the age of 21, the legal age to buy marijuana in the state. With six suites ranging from $299 - $399 per night, revenues in 2016 averaged $110,000 per month. His success has allowed him to expand to three properties, with hopes of franchising to other states where recreational marijuana is also legal. 
Source: Jane Wells, "Weed entrepreneur brings in over $1 million a year running 'bud and breakfast' hotels," cnbc.com, January 18, 2017.
-Refer to the Article Summary.By marketing to recreational marijuana users, Joel Schneider is trying to set his business apart from competing hotels and lodging establishments.All else equal, if his concept remains successful, in the long run we would expect Schneider to experience

Accepted Answer

In the long run, successful business concepts tend to attract more competitors, which can lead to increased competition and lower economic profits as the market becomes more saturated.

Question 12

Of the factors that are within the control of the firm's owners, the most important factors that make a firm successful are

Accepted Answer

The differentiation of products allows a firm to create a unique and desirable product, which gives it a competitive advantage. Producing at a lower cost than competitors allows a firm to offer lower prices or higher profits, both of which can lead to success. While trademark protection and government lobbying can be helpful, they are not as important as product differentiation and cost competitiveness. Price selection and employee selection are also important, but they are not as fundamental to success as the other factors listed.

Question 13

A successful trademark is one that becomes a generic name for a product, for example, "Kleenex" has become a generic term for tissues.

Accepted Answer

A successful trademark maintains its distinctiveness and does not become generic, as becoming generic can lead to loss of trademark protection.

Question 14

Article Summary
In Colorado, recreational marijuana is legal but smoking in hotels is not. Former Wall Street lawyer Joel Schneider found a way around this legal conundrum by opening a bed-and-breakfast (B&B), which he refers to as Bud+Breakfast. In Colorado, B&Bs are considered private property and therefore not subject to the no-smoking laws, and Schneider does not allow guests under the age of 21, the legal age to buy marijuana in the state. With six suites ranging from $299 - $399 per night, revenues in 2016 averaged $110,000 per month. His success has allowed him to expand to three properties, with hopes of franchising to other states where recreational marijuana is also legal. 
Source: Jane Wells, "Weed entrepreneur brings in over $1 million a year running 'bud and breakfast' hotels," cnbc.com, January 18, 2017.
-Refer to the Article Summary.By marketing to recreational marijuana users, Joel Schneider is trying to set his business apart from competing hotels and lodging establishments.This is an example of

Accepted Answer

Joel Schneider is differentiating his bed-and-breakfast (B&B) business by marketing to recreational marijuana users, a specific segment of the market. By doing so, he is setting his business apart from competing hotels and lodging establishments, making it an example of product differentiation.

Question 15

Marketing refers to all the activities necessary for a firm to sell a product to a consumer.

Accepted Answer

Marketing includes all the activities a firm undertakes to promote and sell a product or service to its target audience.

Question 16

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated.How do these problems affect the innovating firm?

Accepted Answer

Design flaws or problems with the product can lead to reduced profits for the innovating firm as well as increased competition from competitors who can enter the market with a better product. While it is possible that consumers may be forgiving, this is not always the case and the impact on the firm's profits can still be significant. Additionally, the firm may incur additional costs in improving the product, which can further erode profits. The first-mover advantage may not necessarily protect the firm if the design flaws are significant enough to drive consumers to switch to a competitor's product.

Question 17

Why are many companies concerned about brand management?

Accepted Answer

The answer of Why are many companies concerned about brand...

Question 18

Which of the following is an example of a factor that a firm's owners and managers can control in making the firm successful?

Accepted Answer

The ability to produce the product at a lower cost is a factor that the firm's owners and managers can control through implementing cost-saving measures such as using more efficient production techniques or negotiating better deals with suppliers. Changing consumer tastes, a rise in the price of a key input, and the number of competitors in the market are factors that are largely beyond the control of the firm's owners and managers.

Question 19

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market.An example that has been used to illustrate this is

Accepted Answer

The introduction of the first ballpoint pen in 1945 is an example where the first firm did not maintain a long-term advantage, as later entrants improved on the design and captured significant market share.

Question 20

Some factors that allow firms to make economic profits are beyond its control.All but one of the following is an uncontrollable factor.Which factor is controllable?

Accepted Answer

Product differentiation is a controllable factor as firms can influence it through marketing, branding, and product development strategies.

Quiz 13: Monopolistic Competition: the Competitive Model in a