Question 1

Among arguments for and against advertising,both sides agree that advertising leads to

Accepted Answer

The debate surrounding advertising's effect on prices and competition is inconclusive and does not lead to a clear answer. Therefore, none of the choices A, B, or C are correct. The effects of advertising may vary depending on the market and circumstances, making it difficult to draw firm conclusions.

Question 2

Advertising that uses celebrity endorsements is most likely intended to

Accepted Answer

Celebrity endorsements are typically used to signal product quality to consumers. When a well-known and reputable celebrity endorses a product, consumers may perceive it as being of higher quality and therefore be more likely to buy it. This can lead to increased sales and profits for the company. However, it is important to note that celebrity endorsements may not always have the desired effect and can sometimes be seen as insincere or unauthentic.

Question 3

In markets where restrictions on advertising have been used to curtail competition,the U.S.courts have generally

Accepted Answer

The U.S. courts have generally overturned laws that prohibit advertising in markets where restrictions on advertising have been used to curtail competition.

Question 4

Economists John Kenneth Galbraith and Friedrich Hayek disagreed about the roles of advertising and government.Which of the following is correct?

Accepted Answer

Galbraith believed that advertising manipulated and created artificial desires in consumers, while Hayek believed that no producer could determine or control consumers' tastes, even through advertising.

Question 5

A firm can signal the high quality of its product by

Accepted Answer

The answer of A firm can signal the high quality...

Question 6

According to one theory,advertising sends a signal to consumers about the quality of the product being offered.An implication of this theory is that

Accepted Answer

The answer of According to one theory,advertising sends a signal...

Question 7

Evidence suggests that,in markets with differentiated products but little advertising,

Accepted Answer

The answer of Evidence suggests that,in markets with differentiated products...

Question 8

A study of the market for optometrists' services in the 1960s showed that

Accepted Answer

The study found that legal restrictions on advertising by optometrists were causing the average price of eyeglasses to be higher than it would be if there were more competition. Therefore, removing these restrictions would lead to a decrease in the average price. Choices A and B are not mentioned in the study, and choice D is not directly addressed.

Question 9

In his 1944 book,The Road to Serfdom,Friedrich Hayek argued that

Accepted Answer

The answer of In his 1944 book,The Road to Serfdom,Friedrich...

Question 10

According to the signaling theory of advertising,consumers

Accepted Answer

According to the signaling theory, advertising serves as a signal to consumers about the quality and characteristics of a product. Consumers may perceive a firm that invests heavily in advertising as being more credible and of higher quality than a firm that does not advertise. Therefore, consumers may be more impressed by a firm's willingness to spend money on advertising than they are by the content of the advertisement.

Question 11

Television advertisements aired during major sporting events are very expensive.A theory asserting that people buy a product simply because it is advertised would suggest that information on the high cost of advertising

Accepted Answer

The answer of Television advertisements aired during major sporting events...

Question 12

Evidence from the market for eyeglasses suggests that advertising leads to

Accepted Answer

The answer of Evidence from the market for eyeglasses suggests...

Question 13

Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with

Accepted Answer

When a firm spends a large amount of money on advertising a particular product, it signals to consumers that the product is of high quality. This is because a company investing a lot of money in promoting a product is likely to have confidence in its quality and want to showcase its benefits to the target audience.

Question 14

Professional organizations and producer groups have an incentive to

Accepted Answer

Professional organizations and producer groups often have a common interest in reducing competition on the basis of price, in order to maintain higher prices or profit margins. By restricting advertising, they may be able to limit price competition and maintain higher prices.

Question 15

A law that restricts the ability of hotels/motels to advertise on billboards outside of a resort community would likely lead to

Accepted Answer

Restricting the ability of hotels/motels to advertise on billboards outside of a resort community would limit their ability to attract customers, especially those who are not familiar with the area. This would reduce the efficiency of local lodging markets, as customers may not be aware of all the options available to them. However, it is unlikely to lead to A, C, or D as the restriction would only affect the advertising aspect of the market, not necessarily the price competition or consumer demand.

Question 16

Results of the study done by Lee Benham on advertising for eyeglasses would suggest that

Accepted Answer

The answer of Results of the study done by Lee...

Question 17

Advertisements that appear to convey no information at all

Accepted Answer

Advertisements that appear to convey no information can serve as a signal to consumers that firms are willing to invest significant amounts of money in advertising. This can signal to consumers that the product or brand is of high quality or significant value, even if the content of the advertisement itself does not provide any specific information.

Question 18

One theory of advertising suggests that

Accepted Answer

The answer of One theory of advertising suggests that
...

Question 19

In the study done by Lee Benham on advertising for eyeglasses,

Accepted Answer

The answer of In the study done by Lee Benham...

Question 20

In Lee Benham's 1972 article examining the impact of advertising on the average price paid for a pair of eyeglasses,Benham found that

Accepted Answer

Lee Benham's 1972 article found that the average price paid for eyeglasses was nearly 20% lower in the states that did not restrict advertising.

Quiz 16: Monopolistic Competition