Question 1

________ describes the actions a firm takes to maintain the differentiation of its product over time.
A)Product differentiation
B)Brand management
C)Aggressive marketing
D)Advertising

Accepted Answer

Brand management typically involves maintaining the differentiation of a company's products over time. This can be accomplished through various actions such as consistent messaging, product development, and quality control to ensure that the brand image remains strong and distinctive.

Question 2

Most economists believe that consumers would be better off if markets were perfectly competitive rather than monopolistically competitive.

Accepted Answer

The answer of Most economists believe that consumers would be...

Question 3

Brand management refers to
A)picking a brand name for a new product that will attract attention.
B)the efforts to maintain the differentiation of a product over time.
C)efforts to reduce the cost of production.
D)selling the right to use a brand name in a particular market.

Accepted Answer

Brand management is the process of maintaining, improving, and upholding a brand's image and reputation over time. It involves all efforts made to keep the brand relevant, differentiated, and consistent in the minds of consumers. It can include various activities such as brand positioning, brand identity development, and brand marketing. Option A is incorrect because picking a brand name is only a small part of brand management. Option C is unrelated to brand management, and option D refers to brand licensing, which is not the same as brand management.

Question 4

Monopolistically competitive firms can differentiate their products
A)by producing at minimum efficient scale.
B)by producing where marginal revenue equals marginal cost.
C)by equating price and average total cost.
D)through marketing.

Accepted Answer

Monopolistically competitive firms can differentiate their products through marketing, such as branding, packaging, and advertising. This differentiation allows them to capture a segment of the market and charge a price premium compared to their competitors who do not have the same differentiation.

Question 5

Nike has used Michael Jordan to create the impression that Air Jordan basketball shoes are superior to any other basketball shoes.Nike is attempting to
A)differentiate Air Jordan basketball shoes from other types of basketball shoes.
B)lower the marginal cost of producing Air Jordan basketball shoes.
C)increase its profit by raising the price of Air Jordan basketball shoes.
D)convince consumers that Air Jordan basketball shoes are no different from other basketball shoes favored by celebrities.

Accepted Answer

Nike is attempting to differentiate Air Jordan basketball shoes from other types of basketball shoes by using Michael Jordan to create the impression that they are superior.

Question 6

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

Accepted Answer

The answer of Does the fact that monopolistically competitive firms...

Question 7

Which of the following is a disadvantage of trademarking a firm's product?
A)A trademark differentiates a firm's product.
B)A trademark conveys information about the product to the public.
C)A trademark may become so widely used to denote a particular type of product that the trademark may no longer be a legally protected brand name.
D)A trademark does not affect demand for the firm's product.

Accepted Answer

If a trademark becomes too commonly used to reference a product, it may become a generic term and lose its legal protection as a brand name. This means that other companies would be able to use the same name for their own products, potentially causing confusion among consumers and negatively impacting the original firm's sales.

Question 8

Which of the following statements is true about advertising by a monopolistically competitive firm?
A)Since the monopolistic competitor, like the perfect competitor, makes zero profit in the long run, it is a waste of resources to advertise its products.
B)Advertising could make the monopolistic competitor's demand more inelastic, but advertising has no effect on a perfect competitor's demand.
C)Advertising will be more beneficial if a monopolistic competitor colludes with other firms to advertise the products of the industry as a whole rather than an individual firm's product.
D)Monopolistically competitive firms tend to shun advertising because advertising draws attention to the variety of differentiated products available in the industry.

Accepted Answer

Advertising can make the monopolistic competitor's demand more inelastic by creating brand loyalty among consumers. In contrast, a perfect competitor sells a homogenous product, so advertising has no effect on its demand.

Question 9

Figure 13-19
 
-Refer to Figure 13-19 to answer the following questions.
a.What is the productively efficient output?
b.What is the allocatively efficient output?
c.What is the amount of excess capacity?
d.Suppose the firm is currently producing 14 units.What happens if it increases output to 17 units?

Accepted Answer

The answer of Figure 13-19
 
-Refer to Figure 13-19 to...

Question 10

What is meant by "excess capacity"? How does it relate to consumer utility?

Accepted Answer

The answer of What is meant by "excess capacity"? How...

Question 11

To maximize their profits and defend those profits from competitors, monopolistically competitive firms must
A)lobby government to erect barriers to entry in their industries.
B)limit foreign competition in their markets by encouraging the government to impose tariffs and other trade restrictions.
C)differentiate their products.
D)achieve economies of scale.

Accepted Answer

Monopolistically competitive firms differentiate their products in order to create a perceived difference between their products and those of their competitors. This helps them to create brand loyalty and therefore charge higher prices, which maximizes their profits. Lobbying government to erect barriers to entry in their industries and limiting foreign competition through trade restrictions are not necessarily strategies that monopolistically competitive firms use. Achieving economies of scale is more associated with oligopolies and may not be necessary or feasible for monopolistically competitive firms.

Question 12

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long-run equilibrium for the two types of firms.

Accepted Answer

The answer of Explain the similarities and differences between the...

Question 13

A trademark is
A)a legal instrument which grants a firm the right to differentiate its product.
B)a legal right to position a firm's product in high-traffic public areas such as airports and post offices.
C)a patent on a firm's product.
D)a distinguishing attribute such as a sign or logo that allows a firm to uniquely identify its product.

Accepted Answer

A trademark is a distinguishing attribute, such as a sign or logo, that allows a firm to uniquely identify its product. It is a form of intellectual property that grants the owner exclusive rights to use the trademark in commerce, to prevent others from using the same or similar mark that could cause confusion among consumers.

Question 14

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

Accepted Answer

The answer of Both the perfectly competitive firm and the...

Question 15

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to
A)create a barrier to entry for competing firms.
B)create a perfectly competitive market in which to sell its credit card.
C)convince customers that its card has greater value than those offered by rival firms.
D)shift the demand curve for competing firms to the right.

Accepted Answer

By offering additional services like travel insurance and product insurance, the credit card company is trying to differentiate its product from those offered by rival firms and convince customers that its card has greater value. This can help bring in more customers and increase market share. It is not about creating a barrier to entry or creating a perfectly competitive market, and it does not necessarily shift the demand curve for competing firms.

Question 16

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?
A)Conducting market research is a good way for firms to keep abreast of changing consumer tastes and preferences.
B)Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations.
C)Marketing research could allow a firm to identify new market opportunities and at least, in the short run, a firm can make a profit supplying products to this market segment.
D)If a firm successfully manages its brand, customers become less price sensitive as they perceive fewer substitutes for the firm's brand.

Accepted Answer

Advertising and brand management are not just about gathering information on customer behavior and preferences. They also serve to establish a brand image and create customer loyalty, which can create a barrier to entry for competitors and make customers less price sensitive. Additionally, market research can help firms identify new market opportunities and make a profit in the short run. Therefore, these expenditures are not redundant but serve important functions for firms.

Question 17

Although advertising raises the price of a monopolistic competitor's product, it does confer a benefit to consumers.Which of the following is a benefit to consumers?
A)Advertising acts as a barrier to entry.
B)Advertising engenders brand loyalty.
C)Advertising could provide consumers with useful information about new products and enable them to comparison shop.
D)Advertised products tend to be of higher quality so consumers feel special when they consume advertised products.

Accepted Answer

Advertising can provide consumers with useful information about new products and services, as well as enable them to comparison shop. This can lead to better purchasing decisions and ultimately benefit the consumers. Choices A, B, and D do not necessarily provide a direct benefit to consumers.

Question 18

Which of the following is true of trademarks?
A)A successful trademark is one that becomes a generic name for a product, for example, "Xerox" has become a generic term for making photocopies.
B)A successful trademark is one that allows consumers to immediately identify the source or producer of the product.
C)If a firm is granted a trademark, then no other firms can legally produce similar products for a given period of time.
D)If a firm is granted a trademark, then no other firms can legally sell in the same geographic area for a given period of time.

Accepted Answer

The purpose of a trademark is to distinguish the goods or services of one seller from those of another. Therefore, a successful trademark is one that allows consumers to immediately identify the source or producer of the product. Option A is incorrect because although it may seem like success for a trademark to become a generic term, it actually puts the trademark at risk of losing its legal protection. Option C and D are incorrect because a trademark only provides legal protection for the use of the trademarked name/logo in connection with specific goods or services, and it does not prevent other firms from producing/selling similar products in general.

Question 19

Juicy Couture has been successful in selling women's clothing using an unusual strategy.
According to an article in the Wall Street Journal, the key to the firm's strategy is to "limit distribution to maintain the brand's exclusive cachet, even if that means sacrificing sales, a brand-management technique once used only for high-end luxury brands." In 2006, Juicy clothes were sold in only four department stores: Neiman Marcus, Saks, Bloomingdale's, and Nordstrom.In 2006, its sales have more than quadrupled since 2002.
Source: Rachel Dodes, "From Track Suits to Fast Track," Wall Street Journal, September 13, 2006.
How does limiting the number of stores in which Juicy's products are sold contribute to its success?
A)By sacrificing sales, the company was able to focus on producing high-quality products.
B)It enables Juicy to price its products at a premium and differentiate them from lower-priced products.
C)It helps establish Juicy's products as luxury items favored by the very wealthy.
D)Maintaining the exclusivity of a product increases the demand for the product.

Accepted Answer

The answer of Juicy Couture has been successful in selling...

Question 20

A franchise is
A)a firm that buys and operates a brand name business in a new market.
B)a firm with the legal right to sell a good or service in a particular area.
C)a firm with no competitors.
D)a branch of a national company.

Accepted Answer

The answer of A franchise is
A)a firm that buys and...

Quiz 13: Monopolistic Competition: the Competitive Model in a More Realistic Setting

________ describes the actions a firm takes to maintain the differentiation of its product over time.

Most economists believe that consumers would be better off if markets were perfectly competitive rather than monopolistically competitive.

Brand management refers to

Monopolistically competitive firms can differentiate their products

Nike has used Michael Jordan to create the impression that Air Jordan basketball shoes are superior to any other basketball shoes.Nike is attempting to

Does the fact that monopolistically competitive firms do not achieve productive efficiency or allocative efficiency mean that there is a significant loss in consumer welfare?

Which of the following is a disadvantage of trademarking a firm's product?

Which of the following statements is true about advertising by a monopolistically competitive firm?

What is meant by "excess capacity"? How does it relate to consumer utility?

To maximize their profits and defend those profits from competitors, monopolistically competitive firms must

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long-run equilibrium for the two types of firms.

A trademark is

Both the perfectly competitive firm and the monopolistically competitive firm produce at the output where marginal revenue equals marginal cost (MR = MC)but only the perfectly competitive firm achieves allocative efficiency.Explain why this is the case.

When a credit card company offers different services with its card, like travel insurance for air travel tickets purchased with the credit card or product insurance for items purchased with the card, the credit card company is trying to

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?

Although advertising raises the price of a monopolistic competitor's product, it does confer a benefit to consumers.Which of the following is a benefit to consumers?

Which of the following is true of trademarks?

A franchise is