The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-One reason that monopolistically competitive firms often use celebrity endorsements is that:
A)the firm owners like to be around celebrities so they can feel important.
B)they can link their product's reputation with the celebrity's reputation.
C)celebrity endorsements are comparatively inexpensive.
D)they can have the celebrity as their potential customer.
E)firms like to spend a lot on advertisements.

Question

The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
  MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-One reason that monopolistically competitive firms often use celebrity endorsements is that:
A)the firm owners like to be around celebrities so they can feel important. 
B)they can link their product's reputation with the celebrity's reputation. 
C)celebrity endorsements are comparatively inexpensive. 
D)they can have the celebrity as their potential customer. 
E)firms like to spend a lot on advertisements.

Quizplus · Accepted Answer

Monopolistically competitive firms often use celebrity endorsements because they can link their product's reputation with the celebrity's reputation. This can lead to increased demand and higher profits for the firm. It is not because the firm owners like to be around celebrities, celebrity endorsements are comparatively inexpensive, they can have the celebrity as their potential customer, or because firms like to spend a lot on advertisements.

The Figure Given Below Shows the Revenue and Cost Curves