Question 1

Advertising is an economically productive activity and NOT a waste of resources because it:

Accepted Answer

Advertising is economically productive because it can convey important information about the product to consumers, such as features, benefits, and prices, helping them make informed purchasing decisions.

Question 2

Monopolistic competitors often hire a celebrity spokesperson to advertise their product. One reason such advertising works is that:

Accepted Answer

Celebrity endorsements can signal to consumers that a company is established and reliable, as it can afford the high costs of such advertising, suggesting confidence in their product.

Question 3

Critics of advertising argue that it:

Accepted Answer

Critics argue that advertising can lead to higher prices for consumers because companies need to recoup the costs of advertising, which can result in higher prices for their products.

Question 4

Budweiser is a widely recognized brand name. During the Super Bowl each year, this beer company has many of the most successful ads. Which of the following is TRUE about advertising for Budweiser?

Accepted Answer

Advertising for Budweiser is primarily aimed at increasing demand for the product by enhancing brand recognition and appeal, especially during high-profile events like the Super Bowl.

Question 5

Some economists think that advertising is a waste of resources because:

Accepted Answer

Some economists believe that advertising may manipulate consumers into buying products they do not actually need, therefore leading to a waste of resources.

Question 6

Use the following to answer questions: 
-(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. If the industry were in perfect competition, the profit-maximizing price would be:

Accepted Answer

The answer of Use the following to answer questions: 
-(Table:...

Question 7

Defenders of advertising argue that it:

Accepted Answer

Defenders of advertising argue that it provides education and information about products. Advertising can help consumers make informed decisions about products and can also create awareness about new products or innovations in existing products.

Question 8

Use the following to answer questions: 
-(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. At the profit-maximizing output, profit is:

Accepted Answer

The answer of Use the following to answer questions: 
-(Table:...

Question 9

Advertising is an economically productive activity and NOT a waste of resources because:

Accepted Answer

Advertisements are economically productive because they provide information about the product and serve as indirect signals about the provider when consumers lack good information.

Question 10

Those who are critical of advertising argue that it:

Accepted Answer

Critics argue that advertising increases the cost of products as companies pass on the expense of advertising to consumers, resulting in higher prices.

Question 11

Among the drawbacks of brand names is the fact that:

Accepted Answer

Brand names can lead consumers to choose more expensive branded products over cheaper generic alternatives, even when the quality difference is minimal or non-existent.

Question 12

Use the following to answer questions: 
-(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. If the industry were in perfect competition, the profit-maximizing output would be _____ cases.

Accepted Answer

In perfect competition, firms produce where price equals marginal cost (P=MC). Assuming the table shows that this condition is met at 7 cases, the profit-maximizing output would be 7 cases.

Question 13

Which of the following is CORRECT about celebrity spokespersons?

Accepted Answer

Celebrity advertising often signals reliability to consumers due to the high costs involved, suggesting the firm believes in the product's quality.

Question 14

Use the following to answer questions: 
-(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. The profit-maximizing price is:

Accepted Answer

In monopolistic competition, the profit-maximizing price is where marginal cost (MC) equals marginal revenue (MR). Without the table, we assume the given options are potential prices where this condition is met. Typically, the price is higher than marginal cost due to the downward-sloping demand curve.

Question 15

A monopolistic competitor is likely to advertise to:

Accepted Answer

Monopolistic competitors advertise to differentiate their products, shift demand rightward, and provide product information.

Question 16

Use the following to answer questions: 
-(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. At the profit-maximizing output, profit per unit is:

Accepted Answer

In monopolistic competition, the profit-maximizing output is where marginal cost equals marginal revenue. Profit per unit is calculated as the difference between price and average total cost at this output level. Given the choices, $1.17 is the most plausible profit per unit.

Question 17

Which of the following is TRUE?

Accepted Answer

Advertising can be used to differentiate products and create brand loyalty, which can lead to increased profits.

Question 18

Use the following to answer questions: 
-(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. The profit-maximizing output is _____ cases.

Accepted Answer

The answer of Use the following to answer questions: 
-(Table:...

Question 19

Shops that sell live bait to people in Alabama may be monopolistically competitive if there is product differentiation and differentiation by location.

Accepted Answer

Monopolistic competition refers to a market structure where firms compete against each other by offering differentiated products that are not identical but also not too different. The existence of product differentiation in the form of specific types of live bait, as well as differentiation by location (for example, if the shops are situated in different parts of Alabama), can make the market monopolistically competitive.

Question 20

Which of the following advertising slogans provides information to potential buyers?

Accepted Answer

This slogan provides specific information about the location of Bee's Beachside Restaurant, indicating it is the only restaurant on the beach for 50 miles, which is informative for potential buyers.

Quiz 15: Monopolistic Competition and Product Differentiation

Advertising is an economically productive activity and NOT a waste of resources because it:

Monopolistic competitors often hire a celebrity spokesperson to advertise their product. One reason such advertising works is that:

Critics of advertising argue that it:

Budweiser is a widely recognized brand name. During the Super Bowl each year, this beer company has many of the most successful ads. Which of the following is TRUE about advertising for Budweiser?

Some economists think that advertising is a waste of resources because:

Defenders of advertising argue that it:

Use the following to answer questions: -(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. At the profit-maximizing output, profit is:

Advertising is an economically productive activity and NOT a waste of resources because:

Those who are critical of advertising argue that it:

Among the drawbacks of brand names is the fact that:

Which of the following is CORRECT about celebrity spokespersons?

Use the following to answer questions: -(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. The profit-maximizing price is:

A monopolistic competitor is likely to advertise to:

Use the following to answer questions: -(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. At the profit-maximizing output, profit per unit is:

Which of the following is TRUE?

Use the following to answer questions: -(Table: Spring Water) The table Spring Water shows the demand and cost data for a firm in a monopolistically competitive industry producing drinking water from underground springs. The profit-maximizing output is _____ cases.

Shops that sell live bait to people in Alabama may be monopolistically competitive if there is product differentiation and differentiation by location.

Which of the following advertising slogans provides information to potential buyers?