Which statement is a theory of advertising?

a.Celebrity advertising is not effective in retail food markets.

b.The content of advertising may be irrelevant to product success in the market.

c.Information on price is a necessary ingredient of effective advertising.

d.Cereal manufacturers should not advertise new cereals.

When advertising enhances the ability of markets to allocate resources, what is it most likely to be doing?

a.increasing elasticity of supply

b.addressing psychological rather than informational characteristics of the good

c.conveying information about price, the existence of new products, or locations of retail outlets

d.manipulating people's tastes

A monopolist faces market demand given by P = 60 - Q. For this market, MR = 60 - 2Q and MC = Q. What is the deadweight loss due to the monopoly?

a.$100

b.$400

Which of the following is NOT an example of price discrimination?

a.Airline charges a lower price for round trips than single trips.

b.Prices are different at different gas stations throughout the city.

c.Discount coupons are available free to the public.

d.Many colleges and universities give financial aid to needy students.