Question 1

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated.How do these problems affect the innovating firm?
A) The firm is protected by a first-mover advantage: initial design flaws tend not to harm a firm significantly because consumers resist changing products for fear of incurring high switching costs.
B) They reduce profits for the new innovations and open the door to competitors who can enter the new market with a better product.
C) Because these design flaws were not anticipated, consumers tend to be more forgiving and are likely to remain loyal to the company and its products.
D) The firm's cost increases as it improves the product but it will not be able to raise its price for fear of alienating customers. Consequently, its profits will erode although its market share remains secure.

Accepted Answer

Design flaws or problems with the product reduce profits for the innovating firm and give a chance to competitors to enter the market with a better product. This can lead to a loss of market share and reduce the innovating firm's profitability.

Question 2

Figure 13-13 
-Refer to Figure 13-13.Assume Starbucks is successful with its new health and wellness stores,and as a result it is able to earn economic profits.Which of the graphs in the figure above reflects this?
A) Panel A
B) Panel B
C) Panel C
D) either Panel A or Panel B

Accepted Answer

Panel A reflects a situation where a firm is earning economic profits, as it shows the price (P) being greater than the average total cost (ATC) at the profit-maximizing quantity.

Question 3

In the highly competitive fast-food restaurant market,brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

Accepted Answer

This statement is true. Maintaining high sanitary conditions is crucial for the reputation and success of a brand name fast-food restaurant. Any negative consequences, such as food poisoning outbreaks, can severely harm the reputation and profit of the restaurant. Therefore, they are incentivized to maintain high sanitary standards.

Question 4

One of your classmates asserts that advertising,marketing research,and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?
A) Conducting market research is a good way for firms to keep abreast of changing consumer tastes and preferences.
B) Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations.
C) Marketing research could allow a firm to identify new market opportunities and at least, in the short run, a firm can make a profit supplying products to this market segment.
D) If a firm successfully manages its brand, customers become less price sensitive as they perceive fewer substitutes for the firm's brand.

Accepted Answer

The assertion made by the classmate is incorrect because analyzing past consumer behavior cannot provide a complete understanding of changing trends and preferences. Conducting market research can provide valuable insights into consumer behavior and help firms in identifying new market opportunities. Similarly, brand management and advertising play crucial roles in creating brand value and loyalty, which in turn can insulate a firm from competition and enable it to charge premium prices. Moreover, successful brand management can also reduce price sensitivity among customers. Therefore, the only response that can be rejected is option B as it suggests that creating entry barriers through advertising and brand management can eliminate the need for further product innovations, which is not necessarily true.

Question 5

Which of the following is an example of a factor that a firm's owners and managers can control in making the firm successful?
A) the ability to produce the product at a lower cost
B) changing consumer tastes
C) a rise in the price of a key input, for example, a rise in the price of oil leads to higher energy costs
D) the number of competitors in the market

Accepted Answer

The ability to produce the product at a lower cost is a factor that the firm's owners and managers can control through various means such as improving production processes, reducing waste, or negotiating better deals with suppliers. The other options are external factors that the firm may have little control over.

Question 6

If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated,then the demand for each seller's product is
A) perfectly inelastic.
B) perfectly elastic.
C) relatively inelastic.
D) relatively elastic.

Accepted Answer

The answer of If buyers of a monopolistically competitive product...

Question 7

Draw a graph that shows the impact on a firm's profit when it increases spending on advertising and the increased advertising has no effect on the demand for a firm's product.

Accepted Answer

The answer of Draw a graph that shows the impact...

Question 8

If buyers of a monopolistically competitive product feel the products of different sellers have little differences between them,then the demand for each seller's product is relatively elastic.

Accepted Answer

If buyers perceive little difference between products of different sellers in a monopolistically competitive market, they are more likely to switch between sellers based on price or minor differences, making the demand for each seller's product more elastic.

Question 9

JoJo's Cigar Bar is attempting to set itself apart from its competition by marketing to single women.This is an example of
A) defending a brand name.
B) blocking entry into the market.
C) legally enforcing a trademark.
D) product differentiation.

Accepted Answer

JoJo's Cigar Bar is attempting to differentiate its product from its competitors by targeting a specific demographic (single women). This strategy aims to make its product more appealing and unique to this target market.

Question 10

How might a monopolistically competitive firm continually earn economic profit greater than zero?

Accepted Answer

The answer of How might a monopolistically competitive firm continually...

Question 11

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

Accepted Answer

Monopolistically competitive firms differentiate their products in order to create a perceived value among consumers and establish brand loyalty. This allows them to charge slightly higher prices than their competitors who offer similar products.

Question 12

A successful trademark is one that becomes a generic name for a product,for example,"Kleenex" has become a generic term for tissues.

Accepted Answer

The answer of A successful trademark is one that becomes...

Question 13

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

Accepted Answer

The answer of How would a marketing campaign directed at...

Question 14

A firm that successfully differentiates its product or lowers its average cost of production creates
A) value for its customers.
B) entry barriers into its market.
C) a perfectly inelastic demand curve for its product.
D) economies of scale.

Accepted Answer

The answer of A firm that successfully differentiates its product...

Question 15

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market.An example that has been used to illustrate this is
A) McDonald's entry into the high-end coffee market.
B) Xerox, which became a generic term for making photocopies.
C) Abercrombie and Fitch, which was the first clothing company to market to young men.
D) the introduction of the first ballpoint pen in 1945.

Accepted Answer

The answer of Recent research has shown that the first...

Question 16

If Starbucks is successful at luring away competitor's customers with its new health and wellness stores,what will be the effect on Starbucks' demand and marginal revenue curves?
A) They will both shift to the right.
B) They will both shift to the left.
C) Demand will shift to the left and marginal revenue will shift to the right.
D) Demand will shift to the right and marginal revenue will shift to the left.

Accepted Answer

If Starbucks is successful at luring away competitor's customers with its new health and wellness stores, it means that the demand for Starbucks' products has increased. This will cause the demand curve to shift to the right. As a result, the marginal revenue curve will also shift to the right because marginal revenue is the change in total revenue resulting from a one-unit increase in sales.

Question 17

What is the difference between the terms "marketing" and "advertising"?

Accepted Answer

The answer of What is the difference between the terms...

Quiz 13: Monopolistic Competition: The Competitive Model in a More Realistic Setting

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated.How do these problems affect the innovating firm?

Figure 13-13 -Refer to Figure 13-13.Assume Starbucks is successful with its new health and wellness stores,and as a result it is able to earn economic profits.Which of the graphs in the figure above reflects this?

In the highly competitive fast-food restaurant market,brand name restaurants have a strong profit incentive to maintain high sanitary conditions and avoid any negative consequences.

One of your classmates asserts that advertising,marketing research,and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.Which of the following is not a response you might offer her?

Which of the following is an example of a factor that a firm's owners and managers can control in making the firm successful?

If buyers of a monopolistically competitive product feel the products of different sellers are strongly differentiated,then the demand for each seller's product is

Draw a graph that shows the impact on a firm's profit when it increases spending on advertising and the increased advertising has no effect on the demand for a firm's product.

If buyers of a monopolistically competitive product feel the products of different sellers have little differences between them,then the demand for each seller's product is relatively elastic.

JoJo's Cigar Bar is attempting to set itself apart from its competition by marketing to single women.This is an example of

How might a monopolistically competitive firm continually earn economic profit greater than zero?

A monopolistically competitive firm can convince buyers that its product has value by differentiating its product to suit consumers' preferences.

A successful trademark is one that becomes a generic name for a product,for example,"Kleenex" has become a generic term for tissues.

How would a marketing campaign directed at single women improve the chances of success at a place like a cigar bar?

A firm that successfully differentiates its product or lowers its average cost of production creates

Recent research has shown that the first firm to enter a market often does not have a long-term advantage over later entrants into the market.An example that has been used to illustrate this is

If Starbucks is successful at luring away competitor's customers with its new health and wellness stores,what will be the effect on Starbucks' demand and marginal revenue curves?

What is the difference between the terms "marketing" and "advertising"?