BA 372 Lesson 7 Assignment 7

BA 372 Lesson 7 Assignment 7 - E. lipstick Monopolistically...

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Ashley B. Hilliard 258-10-0169 July 5, 2010-October 22, 2010 BA 372 Lesson#7, Assignment 7 1. How might advertising with no apparent informational content in fact convey information to consumers? It provides a signal of quality. A firm won't be willing to spend a lot of money advertising a low quality good, but will be willing to spend significantly more advertising a high-quality good. 2. Classify the following markets as perfectly competitive, monopolistic, or monopolistically competitive, and explain your answers. A. wooden no.2 pencils Perfectly competitive since pencils by any manufacturer are identical and there are a large number of makers B. copper Perfectly competitive, since all copper is identical and there are a large number of producers. C. local telephone service Monopolistic because it is a natural monopoly it is cheaper for one firm to supply all the output. D. peanut butter Monopolistically competitive because different brand names exist with different quality characteristics.
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Unformatted text preview: E. lipstick Monopolistically competitive because lipstick from different firms differs slightly, but there are a large number of firms who can enter or exit without restriction. 3. Thirty years ago, the market for chicken was perfectly competitive. Then Frank Perdue began marketing chicken under his name. A. How do you suppose Perdue created a brand name for chicken? What did he gain from doing so? Perdue created a brand name for chicken by advertising. By doing so, he was able to set apart his product from other chicken companies and gain market power . B. What did society gain from having brand name chicken? What did society lose? Society gained the feeling that they were always going to be satisfied by the product they are buying. It is 'brand name' marketing, if people like the product and if they continued to believe in that the product with the brand name would always have the same quality, then they will continue to purchase that product....
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This note was uploaded on 02/22/2011 for the course ECON BA 372 taught by Professor Dickliter during the Summer '10 term at Andrew Jackson.

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BA 372 Lesson 7 Assignment 7 - E. lipstick Monopolistically...

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