5. The role of brand names and advertising Which of the following statements about brand names is true? Brand names are always economically wasteful since they dupe consumers into buying more expensive goods and services that are no different from generic versions. Brand names give the seller an incentive to provide consistently high-quality products and services in order to protect the reputation of the brand. It is always rational to prefer brand names over generic substitutes. Read the following example and determine whether it illustrates a common critique or defense of advertising. Paolo sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends. Although he doesn't particularly need new clothes, the commercial prompts him to buy a Brand X t-shirt. This illustrates a common of advertising.

5. The role of brand names and advertising Which of the following statements about brand names is true? Brand names are always economically wasteful since they dupe consumers into buying more expensive goods and services that are no different from generic versions. Brand names give the seller an incentive to provide consistently high-quality products and services in order to protect the reputation of the brand. It is always rational to prefer brand names over generic substitutes. Read the following example and determine whether it illustrates a common critique or defense of advertising. Paolo sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends. Although he doesn't particularly need new clothes, the commercial prompts him to buy a Brand X t-shirt. This illustrates a common of advertising.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 15P

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6. Al's Appliancemart has market power in selling refrigerators. He just got in a shipment of undamaged refrigerators. Al has determined that there are two different types of buyers. One group are high demanders who have a more inelastic demand but tend to be picky about how nice their appliances look (they won't buy a dented one). Other buyers, low demanders, have a relatively more elastic demand, but also don't mind having a refrigerator with some dents. He pays $600 for each refrigerator from his supplier. 3/3 He has calculated that the high and low demander demand functions follows: Low: P = 1,000-0.5QL (QL = 2,000 - 2P) High: P = 1,600 - QH (QH = 1,600 – P) How much profit could Al earn if he sells them as is? How many should he add dents to (with a hammer) in order to maximize profit? What price would he then put on the non-dented and the dented refrigerators and how many would he sell of each? What would his profit then be?
5. The role of brand names and advertising Which of the following statements about expenditures on advertising is true? When a firm spends a small amount of money on advertising, this signals that the quality of the good is high. If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising. O When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality. Read the following example and determine whether it illustrates a common critique or defense of advertising. While shopping for soft drinks, Charlotte is trying to determine whether to purchase the generic seltzer or the brand La Crosse. Although she could not notice the difference between the two in a taste test, she buys the higher-priced La Crosse because she has seen it advertised as being "La drink of La Summer." This illustrates a common of advertising.
6. The role of brand names and advertising Which of the following statements about expenditures on advertising is true? O When a firm spends a small amount of money on advertising, this signals that the quality of the good is high. O when a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality. O If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising. Read the following example and determine whether it illustrates a common critique or defense of advertising. Yakov sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends. Although he doesn't particularly need new clothes, the commercial prompts him to buy a Brand X t-shirt. This illustrates a common ▼ of advertising.
4. Describe the three pricing methods discussed in the textbook (cost-based, demand-based, competition-based).
16. Revenue with Substitutable Products. The Camera Shop sells two popular models of digital single lens reflex (DSLR) cameras. The sales of these products are not inde- pendent; if the price of one increases, the sales of the other increases. In economics. these two camera models are called substitutable products. The store wishes to estab- lish a pricing policy to maximize revenue from these products. A study of price and sales data shows the following relationships between the quantity sold (N) and price (P) of each model: NA 195 0.6PA + 0.25PB N = 301+0.08PA-0.5PB a. Construct a model for the total revenue and implement it on a spreadsheet. b. Develop a two-way data table to estimate the optimal prices for each product in order to maximize the total revenue. Vary each price from $250 to $500 in incre- ments of $10.
5. The role of brand names and advertising Which of the following statements about expenditures on advertising is true? When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality. When a firm spends a small amount of money on advertising, this signals that the quality of the good is high If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising. Read the following example and determine whether it illustrates a common critique or defense of advertising. While shopping for soda, Kyoko is trying to determine whether to purchase the generic cola or the brand ZCola. Although she would not notice the difference between the two in a blind taste test, she buys the higher-priced ZCola because she has seen it advertised as being "The drink that's the life of partieZ." of advertising. This illustrates a common defense
In evaluating marketing actions, what are the two dimensions on whichthey should be evaluated?
5. The role of brand names and advertising Which of the following statements about expenditures on advertising is true? When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality. If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising. When a firm spends a small amount of money on advertising, this signals that the quality of the good is high. Read the following example and determine whether it illustrates a common critique or defense of advertising. Raphael sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends. Although he doesn't particularly need new clothes, the commercial prompts him to buy a Brand X t-shirt. This illustrates a common of advertising.
Scenario Between recalls on mass-produced commercial dog food and a general understanding of the benefits of a healthier diet for pets, the demand for natural or organic dog food is experiencing a significant increase. Wanda's treats are more expensive than the mass-produced treats found in most grocery and big box stores, but she prides herself on providing high-quality products and believes that her customers are willing to pay the extra money for quality. 1. How does Wanda's strategy of being a high-quality provider take advantage of the shifts in consumer demand for healthy dog treats? 2. Identify and describe an event that might occur in the economy that would cause Wanda's strategy to no longer be successful for Salty Pawz. If this event occurred, What actions would Wanda have to take in response, and what impact might they have on her business?
2. There are two brands of cigarettes X, Y. The demand for each is as follows: Qx = 80 – 2p Qy = 60 – 0.5p Assume that the marginal cost of producing cigarette X is $10, the marginal cost of producing cigarette Y is $8, and that the market for both cigarettes is perfectly competitive. Assume that each pack of cigarette X smoked does $5 worth of health damage to the smoker, and a total of $4 worth of health damage to the smoker's neighbors via second-hand smoke. Each pack of cigarette Y smoked does $6 worth of health damage to the smoker, and $5 health damage to the smoker's neighbors. (a) Plot the private demand curve and private supply curve for both cigarettes on separate axes. (b) What is the privately efficient quantity demand of both cigarettes? (c) Add the public supply curves to the graphs you plot in (a). (d) What is the socially efficient quantity demand of both cigarettes?
5. The role of brand names and advertising Which of the following statements about expenditures on advertising is true? If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising. O When a firm spends a small amount of money on advertising, this signals that the quality of the good is high. When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality. Read the following example and determine whether it illustrates a common critique or defense of advertising. Sean sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends. Although he doesn't particularly need new clothes, the commercial prompts him to buy a Brand X t-shirt. defense critique This illustrates a common of advertising.
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