Question 1

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 or product insurance, the credit card company is attempting to differentiate itself from its rivals by providing greater value to potential customers. This will make its card more attractive and increase demand, as customers see it as having more benefits than competing cards.

Question 2

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 enable them to comparison shop, which helps them make more informed purchasing decisions. Option A is incorrect because advertising can also help new firms enter the market if they have a unique selling proposition. Option B is not necessarily a benefit to consumers as it may limit their options to choose from different brands. Option D is incorrect as there is no evidence that advertised products tend to be of higher quality.

Question 3

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

This response agrees with the assertion that advertising and brand management are redundant expenditures, which is not the position that the classmate is challenging. Additionally, using advertising and brand management to create an entry barrier only insulates the firm from competition in the short-term and may not necessarily lead to product innovation.

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. This is the primary purpose of trademarks, to serve as a distinctive identifier of the source of the goods or services. Option A is incorrect because a trademark becoming a generic term for a product is called trademark genericization, and is actually a negative thing for the trademark owner. Options C and D are incorrect because a trademark only grants the owner exclusive rights to use the mark in connection with certain goods or services, and only within a certain geographic area, but does not prevent other firms from producing or selling similar products in other places or markets.

Question 5

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. By advertising and promoting their product as unique or different from similar products offered by competitors, they can create a perceived difference in the minds of consumers. This perceived difference can allow the firm to charge a slightly higher price and capture a portion of the market share, creating a degree of market power.

Question 6

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 is the best choice for defending a successful product's brand name as it provides legal protection against other firms using a similar name or logo. Obtaining a patent on the brand name is not possible as patents only apply to inventions, not brand names. Increasing advertising spend does not necessarily protect the brand name from competitors. Attempting to copyright the brand name may offer some protection, but a trademark is a stronger form of legal defense.

Question 7

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 must differentiate their products to create a unique selling proposition that sets them apart from their competitors. This differentiation allows them to charge a higher price for their product, thereby maximizing their profits. This strategy also creates a barrier to entry for potential competitors, as it is difficult and costly to replicate the uniqueness of the product. However, lobbying government for barriers to entry or limiting foreign competition through trade restrictions would be anti-competitive behavior and potentially illegal. Achieving economies of scale may be beneficial for cost savings but doesn't necessarily maximize profits or defend against competitors.

Question 8

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

Brand management and advertising are two commonly used marketing tools to differentiate products. Brand management involves creating a strong brand identity through factors such as logos, slogans, and packaging, while advertising focuses on promoting the brand and product through various mediums. Both of these tools aim to differentiate the product from competitors and create a unique image in the minds of consumers.

Question 9

________ 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 taken by a firm to maintain the differentiation of its product over time. This can include maintaining a consistent brand image, investing in research and development to improve the product, and developing marketing strategies that highlight the unique benefits of the product. Product differentiation, aggressive marketing, and advertising can all be part of a firm's brand management strategy, but they are not comprehensive enough to fully capture the concept.

Question 10

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. This differentiation is a key marketing strategy for Nike to stand out in a crowded market and attract consumers who want the best performance and style in their basketball shoes.

Question 11

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 refers to the long-term efforts to maintain a brand's differentiation over time and enhance its value in the market. It involves creating a brand identity, establishing brand awareness, shaping brand associations, and leveraging the brand equity to create a competitive advantage. While picking a brand name and selling the right to use a brand name are part of brand management, they are not sufficient to capture its full scope. Similarly, while reduction of production costs may be important for profitability, it is not necessarily related to brand management.

Question 12

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...

Question 13

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 14

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 15

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 so widely used that it is used to refer to an entire category of products, it may no longer be a legally protected brand name. This is known as genericide and can lead to the loss of exclusive rights to the trademark.

Question 16

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 17

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 18

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 by a monopolistically competitive firm can potentially make its demand more inelastic compared to a perfect competitor as advertising can create brand loyalty and differentiation. This means that consumers may be willing to pay a higher price for the advertised product, allowing the firm to make positive economic profits in the short run. However, in the long run, other firms may enter the market and erode the advertising firm's market power. Therefore, advertising may be a viable strategy for monopolistic competition but not for perfect competition.

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 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, logo, or slogan that identifies and differentiates a firm's products or services from those of its competitors. It does not grant a legal right to position a product in high-traffic public areas or provide a patent on the product.

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

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

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?

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?

Which of the following is true of trademarks?

Monopolistically competitive firms can differentiate their products

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

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

Firms use two marketing tools to differentiate their products.What are these two tools?

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

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

Brand management refers to

A franchise 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.

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.

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

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

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

A trademark is