ECN 361 Topic 7 Quiz

1. Question: A firm's opportunity costs of production are equal to its 2. Question: Adibok knows that it produces and sells high-quality athletic shoes. Wurkout knows that it produces and sells low-quality athletic shoes. According to the signaling theory of advertising, 3. Question: Monopolistic competition is considered inefficient because 4. Question: Table 17-5 The table shows the town of Driveaway's schedule for gasoline. Assume the town's seller(s) incurs a cost of $2 for each gallon no fixed cost. Refer to Table 17-5. If there are exactly five then which of the following outcomes is most 5. Question: Figure15-7RefertoFigure15-7.Tomaximizeitsprofit,amonopolistwouldchoosewhichofthefollowingoutcomes? 6. Question: A monopoly can earn positive profits because it 7. Question: In the long run, a monopolistically competitive firm produces a quantity that is 8. Question: Figure16-3Refer to Figure 16-3. The firm in this figure is monopolistically competitive and maximizing profit.Thisfirm 9. Question: Whichofthefollowingisnotanexampleofabarriertoentry? 10. Question: Scenario16-3Considertheproblemfacingtwofirms,YumYumandBertollini,inthefrozenfoodmarket.Eachfirmhasjustcomeupwithanideaforanew"frozenmealfortwo"whichitwouldsellfor$9.Assumethatthemarginalcostforeachnewproductisaconstant$2,andtheonlyfixedcostisforadvertising.Eachcompanyknowsthatifitspends$12milliononadvertisingitwillget1.5millionconsumerstotryitsnewproduct.YumYumhasdonemarketresearchwhichsuggeststhatitsproductdoesnothaveany"staying"powerinthemarket.Eventhoughitcouldget1.5millionconsumerstobuytheproductonce,itisunlikelythattheywillcontinuetobuytheproductinthefuture.Bertollini'smarketresearchsuggeststhatitsproductisverygood,andconsumerswhotrytheproductwillcontinuetobeconsumersovertheensuingyear.Onthebasisofitsmarketresearch,Bertolliniestimatesthatitsinitial1.5millioncustomerswillbuyoneunitoftheproducteachmonthinthecomingyear,foratotalof18millionunits.Refer toScenario16-3.IfYumYumdecidestoadvertiseitsproductitcanexpectto