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