This topic contains a solution. Click here to go to the answer
« previous next »

Author Question: Why would a firm in a monopolistically competitive industry ever advertise? What will be an ideal ... (Read 77 times)

mckennatimberlake

  • Hero Member
  • *****
  • Posts: 559
on: Jun 29, 2018
Why would a firm in a monopolistically competitive industry ever advertise?
 
  What will be an ideal response?

Question 2

People buy insurance do protect themselves from moral hazard. True or false? Explain.
 
  What will be an ideal response?


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

amynguyen1221

  • Sr. Member
  • ****
  • Posts: 355
Reply #1 on: Jun 29, 2018
Answer to Question 1

Similar to virtually every other business decision, advertising carries with it benefits and costs. While advertising causes the fixed costs to increase, and thereby shifts the average total cost curve upward, advertising also might increase the demand for the company's product by temporarily making people believe that the product is better than some other firm's product. Firms in monopolistic competition frequently advertise extensively in order to differentiate their product from those of their competitors and thereby increase the demand for their particular version of the product.

Answer to Question 2

The statement is false. In fact, insurance creates a moral hazard problem because a person with insurance coverage for a loss has less incentive than an uninsured person to avoid such a loss. For example, a person with fire insurance for his house has less incentive to take precautions against fire than a person with no fire insurance does.


mckennatimberlake

  • Member
  • Posts: 559
Reply 2 on: Jun 29, 2018
Wow, this really help

aruss1303

  • Member
  • Posts: 314
Reply 3 on: Yesterday
Thanks for the timely response, appreciate it

« previous next »
 

Did you know?

No drugs are available to relieve parathyroid disease. Parathyroid disease is caused by a parathyroid tumor, and it needs to be removed by surgery.

Did you know?

More than 150,000 Americans killed by cardiovascular disease are younger than the age of 65 years.

Did you know?

More than 30% of American adults, and about 12% of children utilize health care approaches that were developed outside of conventional medicine.

Did you know?

When intravenous medications are involved in adverse drug events, their harmful effects may occur more rapidly, and be more severe than errors with oral medications. This is due to the direct administration into the bloodstream.

Did you know?

As of mid-2016, 18.2 million people were receiving advanced retroviral therapy (ART) worldwide. This represents between 43–50% of the 34–39.8 million people living with HIV.

competitive inhibition competitive inhibition
Sexual swellings are one way for females to advertise their mating availability, thereby inducing ma Sexual swellings are one way for females to advertise their mating availability, thereby inducing ma
The Number of Children Americans Think Are Ideal The Number of Children Americans Think Are Ideal
Industry is responsible for 21% of global greenhouse gas emissions Industry is responsible for 21% of global greenhouse gas emissions
If CP for an ideal gas is 35.4 J/molK, which of the following is CV for this gas? If CP for an ideal gas is 35.4 J/molK, which of the following is CV for this gas?
Competitive firms and maximization Competitive firms and maximization
Video: Leukemia

For a complete list of videos, visit our video library