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Unformatted text preview: Rikki Norton Microeconomics Chapter 16 Questions for Review (1, 4, 5, 6) 1. Price is related to average total cost because they equal each other. Price is related to marginal cost because price will exceed the marginal cost creating profit maximization. 4. Advertising with no apparent informational content might convey information to consumers if it provides a signal of quality. If a company is selling a good that is higher quality they would be willing to spend more money on advertising then if it was poor quality. 5. When new firms enter this industry the number of firms will decrease because there will be an incentive to leave the market due to losses suffered by new competition. 6. Advertising could reduce the economic well being because it can be costly, easily convinces people to change their likes, and makes their products look better than other companies. It people to change their likes, and makes their products look better than other companies....
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- Spring '11