Does a firm's decision to spend money on celebrity endorsers signal about the quality of their product?
What will be an ideal response?
Yes, firms who know that they have less appealing product would not spend lots of money on advertising, because they know they won't get their investment back. On the other hand, if firms know they have an appealing product, they are willing to spend more money to hire a celebrity endorser because their additional expected profits would be larger than the cost of the celebrity endorser.
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The producer surplus to a monopolist must be
A) less than zero or the firm is in violation of anti-trust statutes. B) at least as great as the producer surplus in a competitive market. C) positive, otherwise why would the monopoly produce? D) the same as for a competitive market.
Which of the following is true, other things equal?
a. A reduction in prices will increase the real wealth of those holding a fixed quantity of money. b. A reduction in prices will lead to a decline in net exports. c. A reduction in prices will increase the scarcity of money, raise the real interest rate, and, thereby, encourage investment and consumption. d. A reduction in prices will increase profit margins and, thereby, stimulate additional investment.
In the short run, with predetermined prices, when output is greater than planned aggregate expenditure, firms will:
A. increase planned aggregate expenditure. B. increase production. C. decrease planned aggregate expenditure. D. reduce production.
The circular flow of income shows
A. goods and services flowing in one direction and money payments in the other direction. B. goods and money payments flowing in one direction and services flowing in the opposite direction. C. goods, services, and money payments flowing in the same direction. D. goods flowing in one direction and services and money payments flowing in the other direction.