The overall effect of advertising on economic efficiency is positive, since it tends to lead to increased sales. indeterminate, since it leads to increased excess capacity but may also guide consumers to better decisions. negative, since it utilizes resources that could otherwise be used to expand production. Advertising is not important for efficiency.

The overall effect of advertising on economic efficiency is positive, since it tends to lead to increased sales. indeterminate, since it leads to increased excess capacity but may also guide consumers to better decisions. negative, since it utilizes resources that could otherwise be used to expand production. Advertising is not important for efficiency.

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter10: Strategy: The Quest To Keep Profit From Eroding

Section: Chapter Questions

Problem 10.2IP

See similar textbooks

Similar questions

The overall effect of advertising on economic efficiency is a) positive, since it tends to lead to increased sales. b) indeterminate, since it leads to increased excess capacity but may also guide consumers to better decisions. c) negative, since it utilizes resources that could otherwise be used to expand production. d) Advertising is not important for efficiency.
What are the typical results from a successful advertising campaign? Group of answer choices The perceived demand curve becomes more elastic, leading to more variability in pricing of a firm’s products. A firm sells more units by charging a lower price for its product. The perceived demand curve becomes more inelastic, so demand increases for a firm’s products.
In advertising, a business is not only making consumers aware of the existence of the product and its positive features but is purposely trying to persuade consumers to purchase the product. As a piece of economics which of the following best characterises what advertisers are trying to do? (a) Shift the demand curve to the right and make it more income elastic; (b) Shift the demand curve to the right and make it less income elastic; (c) Shift the demand curve to the right and make it less price elastic; (d) Shift the demand curve to the right and make it more price elastic.
In which of the following situations would a company have a lower chance of losing customers when it raises the price of its product? a) There are low switching costs. b) Companies advertise their prices. c) Customers have many sellers to choose from. d) The product is differentiated across companies.
An organization serves 1,000 customers. Its average and marginal cost is $300 per unit and the price is $500 per unit. The organization has been asked to sell 200 more units to a health maintenance organization for a price of $450 (for the 200 units only). Which statement about this offer is true? The marginal revenue of the offer is $300 per unit The marginal cost of the offer is $350 per unit The marginal revenue associated with offer is less than the marginal cost Selling the additional 200 units to the HMO for $450 per unit will increase profits
Advertising is often described as wasteful and useless for consumer. Focusing on what you learned about asymmetric information and price dispersion, is there an economic rationale for advertising? Are there characteristics of certain types of goods that would make advertising information regarding these goods particularly useful to consumer?
Organizations use which pricing objective to maximize long-term sales? Breakeven pricing Profit maximization Markup pricing Profit-oriented pricing Market share maximization
FRONT PAGE Pricing Disney+ Disney decided it wanted to provide streaming services directly to customers, rather than renting its library of films and television shows to other streaming services like Netflix. But how successful would a streaming service be? In other words, what did the demand for a "Disney+" streaming service look like? Disney knew that the number of subscribers would depend not just on the attractiveness of the Disney archives, but also on the subscription price. After doing some market research, Disney decided to launch Disney+ at a price of $6.99 a month (or $69.99 per year). When Disney+ was launched on November 12, 2019, 10 million people signed up on the first day-a resounding success! Source: News reports, October-December 2019. Suppose Disney+ changes its monthly subscription price from $7 to $9 per month. Graphically show the impact of this price change in the following markets: a. Popcorn, pizza, and other movie snacks
Tyke's Bikes is a bicycle sales and repair shop in a small city. It sells new and used bikes with a narrow profit margin and does repairs at minimal costs. Frequently, if a child comes into the sh with a broken part or a flat tire, Tyke's makes the repair for free if the child has no money. Tyke's also provides a free one-hour repair class for those who want to learn how to fix their bikes. At local organized bike rides, Tyke's provides free services, asking only for voluntary donations. W theory of corporate social responsibility is Tyke's exhibiting? O The narrow view, or invisible hand theory. The moderate view, or government's hand theory. The hybrid view, or citizen's hand theory. The broad view, or good corporate citizenship..
Advertising and Integrated Marketing Communications. Identify messages that you have seen or heard from several companies. Are the companies being consistent with their messages across the markets they are targeting? What factors are causing the media landscape to change? How can you maximize the reach of the promotional mix on a limited budget (that is, how can you get the most exposure for a minimal investment)?
Discuss to what extent you agree with the following statements. Advertising helps raise revenue for the firms and provides information to the customers; therefore, expenditures on advertising are justified.
Monopolistic competition creates inefficiency because of the markups and excess capacity. The graph below depicts the situation for a hypothetical monopolistically competitive firm. The curves included in the graph are demand (D), marginal revenue (MR), average total cost (ATC), and marginal cost (MC). The graph is not graded, but you can move the point labeled P to help you find the numeric values to answer the questions. Price $ 80 MC M 45 P D ATC Quantity What is the size of the markup on the price? Number $0 What is the size of the excess capacity? Number Units