ECON 247 STUDY GUIDE 2026 TEST PAPER
QUESTIONS AND SOLUTIONS GRADED A+
●● Why do firms advertise?.
Answer: attract more buyers to its particular product
●● What are some advantages of advertising?.
Answer: Increase demand for the product
Provide information to consumers
Fosters competition
Might signal quality
●● What are some disadvantages of advertising?.
Answer: Costly
Manipulates peoples tastes
Impedes competition
●● Monopolistic Competition Characteristics.
Answer: many sellers
product differentiation
free entry and exit
Downward sloping demand curve
, ●● Tying.
Answer: occurs when a producer offers retailers two goods together at a
single price, rather than separately
●● resale price maintenance.
Answer: when a producer makes a contractual agreement with a retailer
that they are not allowed to sell their product for less than a certain
amount
●● predatory pricing.
Answer: when its price cut is intended to drive a competing firm out of
the market
●● Competitive market characteristics.
Answer: Many buyers and sellers
Sellers are price takers
goods offered are mostly the same
firms can enter or exit the market
●● How does a firm in a competitive identify the profit-maximizing
level of production?.
Answer: where MR = MC
QUESTIONS AND SOLUTIONS GRADED A+
●● Why do firms advertise?.
Answer: attract more buyers to its particular product
●● What are some advantages of advertising?.
Answer: Increase demand for the product
Provide information to consumers
Fosters competition
Might signal quality
●● What are some disadvantages of advertising?.
Answer: Costly
Manipulates peoples tastes
Impedes competition
●● Monopolistic Competition Characteristics.
Answer: many sellers
product differentiation
free entry and exit
Downward sloping demand curve
, ●● Tying.
Answer: occurs when a producer offers retailers two goods together at a
single price, rather than separately
●● resale price maintenance.
Answer: when a producer makes a contractual agreement with a retailer
that they are not allowed to sell their product for less than a certain
amount
●● predatory pricing.
Answer: when its price cut is intended to drive a competing firm out of
the market
●● Competitive market characteristics.
Answer: Many buyers and sellers
Sellers are price takers
goods offered are mostly the same
firms can enter or exit the market
●● How does a firm in a competitive identify the profit-maximizing
level of production?.
Answer: where MR = MC
