Question 1

Which of the following is an example of a factor that a firm's owners and managers can control in making the firm successful?
A) the ability to produce the product at a lower cost
B) changing consumer tastes
C) a rise in the price of a key input, for example, a rise in the price of oil leads to higher energy costs
D) the number of competitors in the market

Accepted Answer

The ability to produce the product at a lower cost is an internal factor that can be controlled by the firm's owners and managers. This can be achieved through efficient production processes, cost-cutting measures, or sourcing inputs at a lower price. The other factors listed, such as changing consumer tastes, rise in input prices, and number of competitors, are external factors that are beyond the control of the firm's owners and managers.

Question 2

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?
A) The firm is protected by a first-mover advantage: Initial design flaws tend not to harm a firm significantly because consumers resist changing products for fear of incurring high switching costs.
B) They reduce profits for the new innovations and open the door to competitors who can enter the new market with a better product.
C) Because these design flaws were not anticipated, consumers tend to be more forgiving and are likely to remain loyal to the company and its products.
D) The firm's cost increases as it improves the product, but it will not be able to raise its price for fear of alienating customers. Consequently, its profits will erode although its market share remains secure.

Accepted Answer

Design flaws or problems with a new product can lead to reduced profits for the innovating firm and may provide an opportunity for competitors to enter the market with a better product. The first-mover advantage may not protect the firm if the design flaws are significant enough to drive consumers to switch to a competitor's product. While consumers may be forgiving to some extent, ongoing design flaws can erode customer loyalty over time. The firm may also face increased costs as it improves the product, but may not be able to raise the price without risking further customer defections.

Question 3

Which of the following can a firm use to defend a successful product's brand name?
A) The firm can obtain a patent on the brand name.
B) The firm can apply for a trademark to ban other firms from using the product's name.
C) The firm can increase the amount it spends on advertising for the product.
D) The firm can attempt to copyright the brand name.

Accepted Answer

A trademark can be registered to legally protect a brand name from being used by other firms, giving the original firm exclusive rights to use the name. A patent is used to protect inventions or processes, not names. Advertising and copyrighting can help promote and protect the brand, but they do not legally prevent other firms from using the same name.

Question 4

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

A successful trademark is one that allows consumers to immediately identify the source or producer of the product. Option A is incorrect as it is actually a risk for a successful trademark to become a generic term, which can lead to losing legal protection under trademark law. Option C and D are also incorrect as trademarks only protect against the use of a particular mark for similar goods or services, and do not restrict other firms from producing or selling similar products.

Question 5

________ 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 involves the actions a firm takes to maintain the differentiation of its product over time. This can include strategies such as consistent branding, innovation, and marketing to ensure that the product remains unique and desirable in the eyes of consumers. Product differentiation, aggressive marketing, and advertising may all be part of a brand management strategy, but none of them fully encompass the overall approach to maintaining differentiation.

Question 6

One goal a firm tries to achieve when it advertises a product is to
A) make the demand curve for the product more elastic.
B) shift the demand curve for the product to the left.
C) make the demand curve for the product unitary elastic.
D) make the demand curve for the product more inelastic.

Accepted Answer

When a firm advertises a product, it aims to create brand loyalty and increase the perceived value of the product in the minds of consumers. This, in turn, makes the demand curve for the product more inelastic, meaning that changes in price will have less impact on the quantity of the product demanded. This allows the firm to charge a higher price and increase its profits. Therefore, the goal of advertising is to make the demand curve for the product more inelastic.

Question 7

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
A) McDonald's entry into the high-end coffee market.
B) Xerox, which became a generic term for making photocopies.
C) Abercrombie and Fitch, which was the first clothing company to market to young men.
D) the introduction of the first ballpoint pen in 1945.

Accepted Answer

The answer of Recent research has shown that the first...

Question 8

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
A) perfectly inelastic.
B) perfectly elastic.
C) relatively inelastic.
D) relatively elastic.

Accepted Answer

The answer of If buyers of a monopolistically competitive product...

Question 9

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

Accepted Answer

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

Question 10

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 11

A firm that successfully differentiates its product or lowers its average cost of production creates
A) value for its customers.
B) entry barriers into its market.
C) a perfectly inelastic demand curve for its product.
D) economies of scale.

Accepted Answer

The answer of A firm that successfully differentiates its product...

Question 12

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

The answer of A successful trademark is one that becomes...

Question 13

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

Accepted Answer

The answer of Advertising is the action of a firm...

Question 14

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

Accepted Answer

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

Question 15

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 16

When a firm has been granted a trademark, which grants legal protection against other firms using the name of the product that has been granted the trademark, the firm
A) still faces the possibility that the name will become widely used and no longer associated with a specific company.
B) does not have to worry about legally enforcing the trademark; this is the responsibility of the legal system.
C) still must apply for a copyright and a patent to ensure that no other firm will use the product's name.
D) must spend an annual amount on advertising the product each year; the amount it must spend is negotiated by the firm and the government agency that grants the trademark.

Accepted Answer

Even though a firm has been granted a trademark, there is still a possibility that the name may become generic and no longer associated with a specific company, such as Kleenex or Band-Aid. It is important for firms to continually monitor and protect their trademarks to prevent this from happening.

Question 17

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 restaurants have a reputation to uphold and any negative publicity regarding sanitation can harm their business. Therefore, they have a strong profit incentive to maintain high sanitary conditions.

Question 18

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

Accepted Answer

Marketing includes all the activities that a company undertakes to promote its products or services to potential customers and ultimately sell them. It involves creating awareness among consumers, generating interest, incentivizing purchases, and building lasting relationships that keep them coming back for more.

Question 19

Why are many companies concerned about brand management?

Accepted Answer

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

Question 20

Firms use two marketing tools to differentiate their products. What are these two tools?
A) lobbying and word of mouth
B) market research and demand estimation
C) brand management and advertising
D) consumer surveys and market experiments

Accepted Answer

The two marketing tools mentioned in the question are brand management and advertising. These are both used to differentiate a firm's products from those of their competitors by creating a unique image or identity for the brand and promoting it to potential customers. The other options listed, such as lobbying and market research, may be important for firms in other ways, but they are not directly related to product differentiation.

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

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

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?

Which of the following can a firm use to defend a successful product's brand name?

Which of the following is true of trademarks?

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

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

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

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