Which of the following is true about advertising?
a. If monopolistically competitive firms compete through advertising, and if advertising requires sunk-cost investment and creates brand loyalty, then advertising can be an effective entry cost.
b. Advertising may be the only way that a new entrant can penetrate a market dominated by long-established firms.
c. Advertising has no impact on entry costs or market structure.
d. Both answers a. and b. above are correct.
Question 2
A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays 20,000 a year, and take over a store building that he owns and currently rents to his brother for 6,000 a year. His expenses at the sushi bar would be 50,000 . for food and 2,000 for gas and electricity. What are his implicit costs?
a. 26,000.
b. 66,000.
c. 78,000.
d. 52,000.
e. 72,000.
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Advertising Break-even Question
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