Question 1

If we observe a great deal of advertising of dog food,we can infer that

Accepted Answer

The advertising of dog food suggests that it is a highly competitive market with many different brands and options available, indicating that dog food is a highly-differentiated product. This also suggests that firms may need to advertise to differentiate their product from competitors and attract customers. The other answer choices cannot be inferred from the observation of advertising of dog food.

Question 2

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 the firms producing those products view them as differentiated from competitors' products. This differentiation could be in terms of quality, features, branding, or some other factor that the firms believe will make their products stand out in the market. If the market were perfectly competitive, there would be little incentive for firms to advertise, as their products would be interchangeable with those of their competitors. Additionally, the amount of advertising observed does not necessarily provide any information about the costs of production or the rationality of the firms' decisions to advertise.

Question 3

Critics of advertising argue that in some markets advertising may

Accepted Answer

The answer of Critics of advertising argue that in some...

Question 4

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, such as smartphones or luxury cars, tend to spend a significant percentage of their revenue on advertising in order to differentiate their product from competitors in the market. Products produced by natural monopolies, such as utilities and water companies, do not need to spend a significant amount on advertising as they have limited competition. Agricultural products and products with a limited shelf life also do not require extensive advertising as they are often sold through established distribution channels.

Question 5

Advertising

Accepted Answer

All of the choices are correct. Advertising provides information about products and their prices, which helps consumers make informed decisions. It also increases competition among sellers, leading to lower prices. Finally, advertising is often expensive, so companies that advertise signal their commitment to quality to consumers.

Question 6

Critics of advertising argue that advertising

Accepted Answer

Critics of advertising argue that advertising creates demand for products that people do not necessarily want or need, leading to unnecessary consumption and waste.

Question 7

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

Accepted Answer

Advertising is often used to create demand for products that may not be inherently superior but can still generate profits for the company. By promoting the benefits and features of products with mediocre or inferior quality, companies can convince consumers to purchase them and increase their revenue. Low prices and limited availability may also be factors in advertising, but they are not mutually exclusive with mediocre quality products. Therefore, the correct answer is B.

Question 8

Defenders of advertising

Accepted Answer

Defenders of advertising argue that firms use advertising to provide useful information to consumers, such as price, quality, and availability. While it may increase firms' market power and make entry by new firms more difficult, these arguments are not typically used to defend advertising.

Question 9

If advertising reduces a consumer's price sensitivity between identical goods,it is likely to

Accepted Answer

The answer of If advertising reduces a consumer's price sensitivity...

Question 10

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

Accepted Answer

Markets with highly differentiated products are likely to have the largest amount of advertising because firms need to differentiate their products from their competitors and create brand recognition in order to attract customers. Advertising can help firms accomplish these goals.

Question 11

The primary claim of defenders of advertising is that it

Accepted Answer

The primary claim of defenders of advertising is that it enhances the information available to consumers. Advertising provides information about the benefits and features of a product or service, which helps consumers make informed purchasing decisions. Additionally, advertising can create brand awareness and reputation, giving consumers a sense of familiarity and trust with a particular brand.

Question 12

Which of the following is a commonly-cited benefit of advertising?

Accepted Answer

Advertising can signal to consumers the quality of a product or service, especially in markets where there are many options available. This can help consumers make informed purchasing decisions and can also incentivize firms to invest in improving the quality of their products.

Question 13

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product,the firm will

Accepted Answer

By decreasing the elasticity of demand, the firm has more pricing power and can therefore increase its markup over marginal cost. This allows the firm to charge a higher price than it would have been able to charge without advertising. Eventually, however, other firms may also start advertising and the market may become more competitive, leading to the need for the firm to lower its price to remain competitive in the long run.

Question 14

Firm A produces and sells in a market that is characterized by highly differentiated consumer goods.Firm B produces and sells industrial products.Firm C produces and sells an agricultural commodity.Which firm is likely to spend the greatest portion of its total revenue on advertising?

Accepted Answer

Firm A operates in a highly differentiated consumer goods market, which requires continuous advertising and promotion to differentiate its products from competitors. Therefore, it is likely that Firm A will spend the greatest portion of its total revenue on advertising. Firm B deals with industrial products that cater to a specific market segment, and Firm C produces an agricultural commodity that does not require significant promotion or advertisement.

Question 15

When firms in a monopolistically competitive market engage in price-related advertising,defenders of advertising argue that

Accepted Answer

The answer of When firms in a monopolistically competitive market...

Question 16

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

Accepted Answer

Firms that sell highly differentiated products likely incur significant costs associated with advertising as they need to communicate the unique features and benefits of their products to their target customers. This is because the products are not generic and require more effort to differentiate them from other similar products in the market.

Question 17

Critics of advertising argue that advertising

Accepted Answer

Critics argue that advertising creates desires that consumers might not have had otherwise. While advertising may enhance competition and some viewers may enjoy ads, these arguments do not necessarily outweigh the negative impact on consumers.

Question 18

In his 1958 book,The Affluent Society,John Kenneth Galbraith argued that

Accepted Answer

In his book, Galbraith argued that firms use advertising to create a desire for goods that people do not necessarily need or want, thereby artificially creating demand. This is consistent with choice C.

Question 19

Which of the following is not an argument made by critics of advertising?

Accepted Answer

Critics of advertising argue that it manipulates people's tastes, impedes competition, and increases the perception of product differentiation. However, they do not argue that advertising promotes economies of scale. In fact, some argue that advertising can actually decrease economies of scale by creating a need for multiple brands and variations of products.

Question 20

Critics of advertising argue that advertising

Accepted Answer

Critics of advertising argue that advertising creates desires that otherwise might not exist, hinders competition, and often fails to convey substantive information. Therefore, all of the above options are correct.

Quiz 16: Monopolistic Competition

If we observe a great deal of advertising of dog food,we can infer that

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

Critics of advertising argue that in some markets advertising may

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

Advertising

Critics of advertising argue that advertising

Defenders of advertising argue that it is not rational for profit-maximizing firms to spend money on advertising for products that have

Defenders of advertising

If advertising reduces a consumer's price sensitivity between identical goods,it is likely to

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

The primary claim of defenders of advertising is that it

Which of the following is a commonly-cited benefit of advertising?

If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product,the firm will

Firm A produces and sells in a market that is characterized by highly differentiated consumer goods.Firm B produces and sells industrial products.Firm C produces and sells an agricultural commodity.Which firm is likely to spend the greatest portion of its total revenue on advertising?

When firms in a monopolistically competitive market engage in price-related advertising,defenders of advertising argue that

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

Critics of advertising argue that advertising

In his 1958 book,The Affluent Society,John Kenneth Galbraith argued that

Which of the following is not an argument made by critics of advertising?

Critics of advertising argue that advertising