For a firm with market power, advertising expenditures affect all of the following except which one?
Demand Curve
Marginal Cost
Total Cost
Marginal Revenue correct answers Marginal Cost
If a firm spends money on advertising, its gross profit is ________ its net profit. correct answers Grea...
If a firm spends money on advertising, its gross profit is ________ its net profit. correct answers
Greater than
In general, the marginal benefit of advertising ________ as more advertising is purchased
because the gross profits from advertising ________ at a(n) ________ rate. correct answers
Decreases; increase; decreasing
Good Boy Super Treats produces healthy treats for dogs. At its current advertising level, Good
Boy Super Treats marginal cost of advertising is $1.3 million and their marginal benefit is $1
million. Which of the following is true? correct answers The firm should reduce the amount of
advertising to increase its net profit
Pretty Polly produces dresses for little girls. At its current advertising level, Pretty Polly's
marginal cost of advertising is $500,000 and their marginal benefit is $500,000. Which of the
following is true? correct answers The firm is currently maximizing its net profit
Franco's Frozen Ice produces Italian flavored ice that is sold in the freezer section of grocery
stores. Currently, Franco's does not have a fixed advertising budget and advertises in grocery
stores' weekly advertising flyers and on the radio. A unit of advertising in the weekly flyers costs
$2,000 and a unit of advertising on the radio costs $5,000. At their current advertising levels, the
marginal benefit of advertising in the flyer is $2,500 and the marginal benefit of advertising on
the radio is $5,000. Which of the following is true? correct answers To maximize profits,
Franco's should increase the amount of advertising in flyers
Inspection Goods correct answers quality of good can be easily confirmed by inspecting it; least
potential for false advertising
Experience Goods correct answers products that cannot easily be evaluated until after purchase
and use
Credence goods correct answers goods that may be experienced and inspected multiple times but
cannot determine quality; most potential for false advertising **Greenwashing**
Perfect Shots is a company specializing in wedding photos and they have a fixed advertising
budget. Perfect Shots advertises on the radio and the television and it costs $5,000 per unit of
radio advertising and $15,000 per unit of television advertising. At their current advertising
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