What arguments can be made in favor of product differentiation and advertising?
What will be an ideal response?
First, consumers are provided with a large variety of products. Variety is important in ensuring that all consumers are satisfied. Product differentiation leads to innovation, giving us products we didn't have in the past. Product quality is also enhanced because firms have their reputation (and brand name) at stake. In addition, advertising can help consumers make informed, rational choices.
You might also like to view...
Figure 11-6
The industry described in Figure 11-6
A. is not a natural monopoly because no firm would produce in the long run unless the government intervened in the market. B. is not a natural monopoly because the average total cost curve is U shaped. C. is a natural monopoly because the economic profit is positive for a monopolist if the government doesn’t intervene. D. is a natural monopoly because price is less than average total cost at the output that would be produced by the industry under perfect competition.
Consumers concentrate on public choices rather than private choices, because information and the time required to acquire and digest it are scarce
Indicate whether the statement is true or false
Suppose that the only input used in the generation of solar energy is sunlight and has a zero cost. The average total cost of producing electricity is:
A. zero. B. equal to the marginal cost. C. equal to the average fixed cost. D. immeasurably high.
How do changes in interest rates affect exchange rates?
What will be an ideal response?