36. Persuasive advertising: A) is informative. B) is wasteful. C) can create mar

Question

36. Persuasive advertising: A) is informative. B) is wasteful. C) can create market power for firms through brand differentiation D) has been shown to do little to increase sales. 37. Price advertising typically A) raises prices for consumers, as the cost of advertising is simply passed off to consumeTs B) raises prices and lowers outpat for consumers C) is wasteful advertising. D) lowers prices and increases consumer welfare. 38. If a firm has an average product that is not much better than what other fims produce they may wish to focus their advertising on A) quality. B) price. C) deceiving customers D) product information. 39. Monopolistically competitive firms are able to charge: A) P> MC, eliminating any lost gains from trade B) P> MC, so output is produced at minimum per unit cost. C) P> MC, causing an inefficiently lower level of output. D) P-MC, maximizing social surplus. A) sell no output B) continue to sell the same amount of output. C) go out of business. D) sell less output Page 7

Explanation / Answer

31. (D) contestable good

32. (A) many sellers, free entry, and product differentiation

33. (C) decreases,shifts to the left

34. (D) MR + MC = 0

35. (A) expects the product to be successful

36. (C) can create market power for firms through brand differentiation.

37. (A) raises prices for consumers , as the cost of advertising is simply passed off to consumers

38. (D) product information

39.(C) P>MC, causing an inefficientl lower level of output

40. (D) sell less output

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