Question 1

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. If advertising were banned in these markets, what would likely happen to the prices of chips and soda?

Accepted Answer

The answer of Scenario 16-9
Dean goes to the grocery store...

Question 2

Scenario 16-8
Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger.
-Refer to Scenario 16-8. What can consumers conclude from Burger Bonanza's willingness to spend $4 million on an advertising campaign?

Accepted Answer

The answer of Scenario 16-8
Burger Bonanza, a major national burger...

Question 3

The relationship between advertising and product differentiation is

Accepted Answer

When a product is highly differentiated, it may be difficult for consumers to distinguish it from other products. Therefore, firms are more likely to spend heavily on advertising to create brand awareness and highlight the unique features of the product, which in turn aids in differentiation. As such, there is a positive relationship between product differentiation and advertising spending.

Question 4

Scenario 16-8
Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger.
-Refer to Scenario 16-8. What two benefits are conveyed by the brand name Burger Bonanza?

Accepted Answer

The answer of Scenario 16-8
Burger Bonanza, a major national burger...

Question 5

Some firms have an incentive to advertise because they sell a

Accepted Answer

Firms that sell a differentiated product have an incentive to advertise in order to create brand recognition and loyalty among consumers. By charging a price above marginal cost, these firms can cover the cost of advertising and potentially earn a higher profit. Therefore, only option D fits this description.

Question 6

Which of the following correctly lists the products in order from most advertised to least advertised?

Accepted Answer

The answer of Which of the following correctly lists the...

Question 7

In which of the following product markets are we likely to observe the largest amount of advertising?

Accepted Answer

Markets with highly differentiated products, such as the soft drink industry, typically have a lot of advertising because firms need to create brand awareness to differentiate themselves from competitors. In perfectly competitive markets, firms are price takers and do not advertise as they cannot differentiate themselves. Industrial product markets often involve personal selling rather than advertising. In markets where there is very little difference between firms' products, advertising is less necessary as there is less reason to create brand awareness.

Question 8

Compared to other firms, firms that sell highly differentiated products likely incur significant costs associated with

Accepted Answer

Firms that sell highly differentiated products need to advertise their unique features to attract customers, which incurs significant costs.

Question 9

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

Accepted Answer

The answer of In the debate between the critics and...

Question 10

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

Accepted Answer

The answer of Considering perfect competition, monopolistic competition, and monopoly,...

Question 11

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. Which friend is a critic of brand names?

Accepted Answer

The answer of Scenario 16-9
Dean goes to the grocery store...

Question 12

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

Firms that sell highly-differentiated consumer goods tend to spend the greatest percentage of their revenue on advertising. This is because they need to create brand awareness and differentiation in the minds of consumers in order to justify their higher prices and maintain their competitive edge.

Question 13

If we observe a great deal of advertising of men's shaving products, we can infer that

Accepted Answer

If there is a great deal of advertising for men's shaving products, it suggests that firms believe there is a significant differentiation between their product and their competitors. Advertising is often used by firms to highlight the unique features or benefits of their product, in order to create a competitive advantage and generate more sales.

Question 14

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

Accepted Answer

Firms that sell highly-differentiated consumer goods tend to spend a large proportion of their revenue on advertising to differentiate their products from competitors and build brand recognition. This is particularly true in industries such as cosmetics and fashion, where branding plays a significant role in consumer behavior.

Question 15

For the economy as a whole, spending on advertising comprises about what percent of total firm revenue?

Accepted Answer

On average, firms spend about 2% of their total revenue on advertising, though this can vary by industry.

Question 16

Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, and dog food, typically spend what percent of their revenues on advertising?

Accepted Answer

Firms that sell highly differentiated consumer goods typically spend around 10-20% of their revenues on advertising. This is because advertising is crucial for such firms to differentiate themselves from their competitors and create brand awareness in the minds of consumers.

Question 17

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures can have positive profits in the short run?

Accepted Answer

The answer of Considering perfect competition, monopolistic competition, and monopoly,...

Question 18

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. Martina offers two reasons for agreeing with Dean's decision. What are they?

Accepted Answer

The answer of Scenario 16-9
Dean goes to the grocery store...

Question 19

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures results in production of the welfare-maximizing level of output?

Accepted Answer

The answer of Considering perfect competition, monopolistic competition, and monopoly,...

Question 20

Scenario 16-9
Dean goes to the grocery store to buy chips and soda for a party. He purchases brand name products even though generic versions are available at lower prices. His friend John says he was irrational to spend more for a nearly identical product. His friend Martina agreed with Dean's decision to spend more for the brand name products.
-Refer to Scenario 16-9. If Dean bought the brand name because of advertising he saw for the product, a defender of advertising would say

Accepted Answer

The answer of Scenario 16-9
Dean goes to the grocery store...

Quiz 16: Monopolistic Competition

The relationship between advertising and product differentiation is

Scenario 16-8 Burger Bonanza, a major national burger chain, recently decided to spend $4 million on an advertising campaign featuring a world famous actor to promote its new Bomber Burger. -Refer to Scenario 16-8. What two benefits are conveyed by the brand name Burger Bonanza?

Some firms have an incentive to advertise because they sell a

Which of the following correctly lists the products in order from most advertised to least advertised?

In which of the following product markets are we likely to observe the largest amount of advertising?

Compared to other firms, firms that sell highly differentiated products likely incur significant costs associated with

In the debate between the critics and defenders of advertising, what conclusion have policymakers come to regarding the effect of advertising on competition - advertising makes markets more competitive or less competitive?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures features entry in the long run?

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

If we observe a great deal of advertising of men's shaving products, we can infer that

Firms that spend the greatest percentage of their revenue on advertising tend to be firms that sell

For the economy as a whole, spending on advertising comprises about what percent of total firm revenue?

Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, and dog food, typically spend what percent of their revenues on advertising?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures can have positive profits in the short run?

Considering perfect competition, monopolistic competition, and monopoly, which of the market structures results in production of the welfare-maximizing level of output?