econ chapter 13
Why would a firm opt to pay millions of dollars for celebrity endorsements?
A firm may opt to pay millions of dollars for celebrity endorsements in order to signal to consumers that the advertised product is appealing and likely to be popular
brand management
Any action the firm takes to maintain product differentiation over time
Which types of firms use the marginal revenue equals marginal cost approach to maximize profits?
Both perfectly competitive and monopolistically competitive
What trade-offs do consumers face when buying a product from a monopolistically competitive firm?
Consumers pay a price greater than marginal cost but also have a wider array of choices.
If a monopolistically competitive firm's demand curve is above its average total cost curve...(profit)
If a monopolistically competitive firm's demand curve is above its average total cost curve, then this firm is making positive economic profit
Is it easy to enforce trademarks?
Legally enforcing trademarks can be difficult.
Which type of efficiency is achieved by a monopolistically competitive firm in the long run?
Neither allocative nor productive efficiency
How does the product differentiation of monopolistically competitive firms benefit consumers?
Product differentiation can locate firms more conveniently to consumers and offer versions of a product or service that better fits their needs
How the product differentiation of monopolistically competitive firms may benefit consumers?
Product differentiation can locate firms more conveniently to consumers and offer versions of a product or service that better fits their needs
marginal revenue
additional revenue associated with selling an additional unit of output
marketing
all the activities necessary for a firm to sell a product to a consumer
monopolistically competitive firm
characterized by the existence of many firms in the market, differentiated products and low barriers to entry
For what type of market structure is the demand curve the same as marginal revenue?
perfect competition
Why do monopolistically competitive firms have some control over price?
the products they produce are differentiated
Where does a monopolistically competitive firm in a long-run equilibrium produce?
where its demand curve is tangent to its average total cost curve (the firm is making zero economic profit and no firms will enter or exit this market)
A monopolistically competitive firm produces...
where marginal revenue = marginal cost