Which of the Following Statements Is True About Advertising by a Monopolistically

question 72

Multiple Choice

Which of the following statements is true about advertising by a monopolistically competitive firm?

• A)Since the monopolistic competitor, like the perfect competitor, makes zero profit in the long run, it is a waste of resources to advertise its products.
• B)Advertising could make the monopolistic competitor's demand more inelastic, but advertising has no effect on a perfect competitor's demand.
• C)Advertising will be more beneficial if a monopolistic competitor colludes with other firms to advertise the products of the industry as a whole rather than an individual firm's product.
• D)Monopolistically competitive firms tend to shun advertising because advertising draws attention to the variety of differentiated products available in the industry.

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Definitions:

Securities

Assets indicating equity in a publicly-traded company, a bond signifying indebtedness to a company or government, or options granting ownership rights.

Collateralized Debt Obligations

Collateralized debt obligations (CDOs) are complex financial instruments that pool together cash flow-generating assets and repackages this asset pool into discrete tranches that can be sold to investors.

Default Risk

The potential that a borrower will fail to meet the obligations of a loan or debt agreement.

Mortgages

Loans specifically designed for the purchase of real estate, secured by the property itself.