question
If the average total costs are the same for a perfectly competitive firm and a monopolistically competitive firm, then we know that
answer
the monopolistically competitive firm will produce fewer units than the perfectly competitive firm.
question
In comparing the long-run equilibrium of perfect competition and monopolistic competition, which of the following is true?
answer
Perfect competition: P = MC = minimum of ATC and zero economic profits;
Monopolistic competition: P > MC, P > minimum ATC and zero economic profits
Monopolistic competition: P > MC, P > minimum ATC and zero economic profits
question
Why are brand names and advertising important features of monopolistic competition?
answer
Both of these techniques can be used to increase the demand for the product.
question
If a firm is selling a search good it is more likely to
answer
use informational advertising.
question
When the qualities of a good are relatively easy to assess in advance of their purchase, the good is known as
answer
a search good.
question
When a firm is selling an experience good it is more likely to
answer
use persuasive advertising.
question
Classify each of the following as an example of direct (D), interactive (I), and/or mass marketing (MM).
answer
A mortgage company targets a list of specific low risk borrowers for a barrage of e-mail messages touting its low interest rates and fees.
D
The sales force of a pharmaceutical company visits physicians' offices to promote new medications and to answer physicians' questions about treatment options and possible side effects.
D
An online bookseller pays fees to an Internet search engine to post banner ads relating to each search topic chosen by someone conducting a search; in part this helps promote the bookseller's brand, but clicking on the banner ad also directs the person to a Web page displaying books on the topic that are available for purchase.
I
A national rental car chain runs advertisements on all of the nation's major television networks.
MM
D
The sales force of a pharmaceutical company visits physicians' offices to promote new medications and to answer physicians' questions about treatment options and possible side effects.
D
An online bookseller pays fees to an Internet search engine to post banner ads relating to each search topic chosen by someone conducting a search; in part this helps promote the bookseller's brand, but clicking on the banner ad also directs the person to a Web page displaying books on the topic that are available for purchase.
I
A national rental car chain runs advertisements on all of the nation's major television networks.
MM
question
...
answer
When a firm produces an information product, the initial or fixed costs are high.
Consequently the average fixed cost and average total cost decrease as the volume of output increases.
Since most of the costs are the initial fixed costs of development, once the product is developed, the marginal cost of producing more units of the product are typically low and constant.
In this case, then, the low and constant marginal cost is below the average cost.
Consequently the average fixed cost and average total cost decrease as the volume of output increases.
Since most of the costs are the initial fixed costs of development, once the product is developed, the marginal cost of producing more units of the product are typically low and constant.
In this case, then, the low and constant marginal cost is below the average cost.
question
What does the long-run price equal for an informational product?
answer
The price equals average total cost.
question
Assume that every time you wanted to take this quiz you were charged a fee. The publisher's cost for developing the quizzes and making them available does not vary with the number of times you or anyone else takes the quizzes. These quizzes
answer
are known as an informational product.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
