14.4. ADVERTISING AND BRAND SWITCHING. Empirical evidence suggests that the prob bility of a household switching to a different brand of breakfast cereal is increasing the advertising intensity of that brand. However, the effect of advertising is significar lower for households who have previously tried that brand.21 What does this sugg about the nature of advertising expenditures (persuasion vs. information)?
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- . When Chinese automakers began exporting cars, rather thanfocusing on developed nations in the West, they shippedautos to emerging markets in countries such as Algeria, Russia,Chile, and South Africa. In these markets, even used vehiclesfrom multinational manufacturers are relatively scarce—andrelatively expensive. The Chinese automakers, who prioritizelow cost rather than design or even safety, applied a penetration-pricing strategy. A woman in Santiago, Chile, who boughta new Chery S21 explained, “The price factor is fairly decisive.I paid $5,500 new and full. Toyota with similar features costsaround $12,000.” Why do you think Chinese automakerschose that pricing strategy? Do you think it was successful?As Chinese regulators pressure these manufacturers to maketheir cars safer, do you think they will be able to keep theirprices low compared with those of the international automakers? Why or why not?26Exercise A.6. Do monopolistically competitive markets normally have the optimal number of products?Review Question 12-01 O A monopolistically competitive firm gets a massive amount of free advertising when a government agency gives it an award and millions of people mention the award to each other on social media. Which of the following is most likely to happen? Mc Graw Multiple Choice O Demand becomes more elastic and pricing power increases. Demand becomes less elastic and pricing power decreases. Demand becomes less elastic and pricing power increases. Demand becomes more elastic and pricing power decreases. < Prev 10 of 10 MacRook Di Next
- In evaluating marketing actions, what are the two dimensions on whichthey should be evaluated?itle A reliable 15-year-old babysitter can be a price maker within her own neighborhood. Suppose that th Description A reliable 15-year-old babysitter can be a price maker within her own neighborhood. Suppose that this babysitter wishes to implement a Multipart Pricing Plan. Customers who use her services less than L hours per month will pay a high price of PH dollars per hour. Customers who use her services more than L hours per month will still pay PH dollars for the first L hours, but for any additional hours they can then pay the lower price PL dollars per hour which she will generously set equal to her marginal cost. Assume that market demand is QD = 60 – 10P and her total costs are C = 3Q; so PL = $3 per hour. If she set her high price at $4 per hour, would her customers accept a limit of L = 24 hours per month in order to use the remainder of her services at a price of $3 an hour? Provide a labelled diagram and briefly explain. Suppose that this talented babysitter was…Assuming you are the managing director of a firm that produces three goods: A, Band C. The price elasticity of demand for A is 1.2, for B it is 1.00 and for C it is 0.75.It is known that he firm is experiencing serious cash flow problems and you have toincrease total revenue as soon as possible. If you were in a position to set the pricesfor these goods, what would be your pricing strategy for each product
- below cost? That is, explain a rationale of loss leaders, using your U4. The coconut-milk carts from Exercise S7 set up again the next day. Nearly 172 [CH. 5] SIMULTANEOUS- MOVE GAMES a dollars of a pound of cheese. (a) Initially, L'Épicerie runs La Boulangerie and La Fromagerie as if the were separate firms, with independent managers who each try to maximize their own profit. What are the Nash equilibrium quanti- ties, prices, and profits for the two divisions of L'Épicerie, given the new quantity equations? (b) The owners of L'Épicerie think that they can make more total profit by coordinating the pricing strategies of the two Yuppietown divi- sions of their company. What are the joint-profit-maximizing prices for bread and cheese under collusion? What quantities do La Bou- langerie and La Fromagerie sell of each good, and what is the profit that each division earns separately? (c) In general, why might companies sell some of their goods at prices below cost? That is, explain a…OA OB OC Alpha's Price Policy OD. High Low A с Beta's Price Policy High Low $20 $30 $20 $10 B D $10 The diagram above shows potential outcomes for two oligopolistic competitors. Beta's profits are shown in the upper right corner of each box and Alpha's profits in the lower left corner. If Alpha and Beta engage in collusion (and do not cheat), where will they end up? $15 $30 $152. The market for dark chocolate us characterized by Cournot duopolists - Honeydukes and Wonka industries. The market demand for dark chocolate is:P = 8 - 0.005Qdwhere P is the price per bar in dollars and Qd is dark chocolate's daily quantity demanded in bars (use qh to represent the quantity of dark chocolate sold by Honeydukes and qw to represent the quantity of dark chocolate sold by Wonka Industries). Honeydukes has a constant marginal cost of $2.50 per bar, while Wonka Industries has a constant marginal cost of $3.00 per bar. The firms move simultaneously in choosing their profit-maximizing quantity of output.a. Given the firms move simultaneously, what is the equation for Honeydukes' reaction function with qh expressed as a function of qw?b. Given the firms move simultaneously, what is the equation for Wonka's reaction function with qw expressed as a function of qh?c. What quantity of dark chocolate will each firm produce in equilibrium and what price will be established for a…
- Which of the following statements about brand names is true? O It is always rational to prefer brand names over generic substitutes. O Brand names are always economically wasteful since they dupe consumers into buying more expensive goods and services that are no different from generic versions. O Brand names give the seller an incentive to provide consistently high-quality products and services in order to protect the reputation of the brand. Read the following example and determine whether it illustrates a common critique or defense of advertising. Lorenzo sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends. Although he doesn't particularly need new clothes, the commercial prompts him to buy Brand X t-shirt. This illustrates a common of advertising.Larry, Curly, and Moe run the only saloon in town.Larry wants to sell as many drinks as possiblewithout losing money. Curly wants the saloon tobring in as much revenue as possible. Moe wantsto make the largest possible profits. Using a singlediagram of the saloon’s demand curve and its costcurves, show the price and quantity combinationsfavored by each of the three partners. Explain. (Hint:Only one of these partners will want to set marginalrevenue equal to marginal cost.)Aside from advertising, how can monopolistically competitive films increase demand for their products?