At the monopolist's optimal amount of advertising,
A) the marginal benefit of advertising exceeds the marginal cost of advertising.
B) the marginal benefit of advertising is equal to the marginal cost of advertising.
C) the marginal benefit of advertising is two times smaller than the marginal cost of advertising.
D) the marginal benefit of advertising is at least five times smaller than the marginal cost of advertising.
Question 2
Incumbents are unaffected by fixed costs of entry while potential entrants are affected by them because
A) for potential entrants the cost is avoidable, while for the incumbent, it is not.
B) fixed costs will be greater for the potential entrant than for the incumbent.
C) fixed costs are zero for the incumbent.
D) incumbents will act to prevent entry at all costs.
A graphical representation of the marginal value theorem.
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