One of your classmates asserts that advertising, marketing ...

[daltonest1984]

One of your classmates asserts that advertising, marketing research, and brand management are redundant expenditures because a firm can obtain the same information by simply looking at what customers are already buying.
 
  Which of the following is not a response you might offer her?
  A) If a firm successfully manages its brand, customers become less price sensitive as they perceive fewer substitutes for the firm's brand.
  B) Advertising and brand management allow a firm to create an entry barrier which will insulate the firm from competition and from undertaking further product innovations.
  C) Conducting market research is a good way for firms to keep abreast of changing consumer tastes and preferences.
  D) Marketing research could allow a firm to identify new market opportunities and at least, in the short run, a firm can make a profit supplying products to this market segment.

Question 2

Refer to Table 17-5. Oil Can Harry's, a new automobile service shop, is ready to start hiring. The table above shows the relationship between the number of mechanics the firm hires and the quantity of oil changes it produces.
 
  a. Suppose the price of an oil change is 20. Complete the table by filling in the values for marginal product and marginal revenue product.
  b. Oil Can Harry's is an input price-taker. Suppose the wage paid to mechanics is 80 per day. What is the profit-maximizing number of mechanics?
  c. Suppose the wage rate rises to 100 per day.
   (i) What happens to the firm's demand curve for mechanics?
   (ii) What happens to the profit-maximizing quantity of mechanics?
  d. Suppose the wage rate is 60 per day and the price of an oil change is now 15.
   (i) What happens to the firm's demand curve for mechanics?
   (ii) What happens to the profit-maximizing quantity of mechanics?

[kusterl]

Answer to Question 1

B

Answer to Question 2

a.
Number of Mechanics Oil Changes per Day Marginal Product Marginal Revenue Product
1 6 6 120
2 12 6 120
3 17 5 100
4 21 4 80
5 24 3 60
6 26 2 40

b. The profit-maximizing number of mechanics is 4, where the marginal revenue product equals the wage rate.
c. (i) The demand curve does not change.
(ii) The profit-maximizing quantity of mechanics falls to 3.
d. (i) The demand curve shifts to the right.
(ii) The profit-maximizing quantity of mechanics increases to 4.