Chapter 3 Media Economics
Chapter 3 Media Economics
3.1 Multiple-Choice Questions
1) Billionaire computer programming whiz Mark Zuckerberg created all of the following EXCEPT
A) AOL.
B) Facebook.
C) Facemash.
D) ZuckNet.
2) Since it became established nationwide, Facebook sustains itself financially by
A) advertising revenues.
B) cash from venture capitalists.
C) investments in its IPO.
D) sales of Facebook-trademarked merchandise.
3) An economic system in which private owners operate businesses for profit is called
A) socialism.
B) capitalism.
C) fascism.
D) new-world economics.
4) With rare exception, the primary goal of most U.S. mass media is to
A) make profits.
B) provide news and information to the masses.
C) entertain.
D) provide an exchange of ideas.
5) Mass media industries earn most of their revenue from
A) subscriptions and advertising.
B) advertising and classifieds.
C) sales and subscriptions.
D) advertising and sales.
6) What advertisers are really paying the mass media for is
A) publicity and prestige.
B) access to potential customers.
C) protection against financial stagnation.
D) conglomeration.
7) When Gannett Corporation diversified and began acquiring radio and television stations,
billboards, magazines, and other enterprises in addition to newspapers, it
A) became a newspaper chain.
B) moved into the category of media conglomerate.
C) surpassed Rupert Murdoch’s News Corp. in size and revenue.
D) was able to reach an audience larger than Facebook’s.
8) One trait of media conglomerates is
A) eliminating boards of directors at any newly-acquired subsidiaries.
B) having day-to-day decisions for all subsidiaries made in one centralized, executive office.
C) ownership of subsidiaries that remain distinct operating entities.
D) ownership of some subsidiaries whose business does not involve communication.
9) Conglomerates typically use all the following business practices EXCEPT
A) board-level micro-management of all aspects of their operations.
B) day-to–day decision-making is done by appointed middle managers.
C) major policy and profit-expectations are set by a board of directors.
D) performance-based evaluation systems treat under-achievers as expendable.
10) The recession that began in 2007 resulted in
A) media conglomerates buying more companies.
B) media conglomerates experiencing increased profits.
C) media conglomerates merging with other conglomerates.
D) media conglomerates engaging in panic-driven divestiture.
11) Media tycoon Rupert Murdoch controls a diverse media empire that includes the
A) Wall Street Journal.
B) New York Times.
C) Washington Post.
D Chicago Tribune.
12) Rupert Murdoch, who controls News Corp. and other media ventures, is well known for his
A) disdain for opportunism.
B) lackadaisical approach in setting goals.
C) profit-driven motivation.
D) unwillingness to correct impetuous decisions.
13) If Company XYZ produces a magazine solely for its employees, that publication is a
A) general-interest magazine.
B) sponsored magazine..
C) pulp magazine.
D) targeted-subscriber magazine. .
14) Established in 1908, the Christian Science Monitor is sponsored by the
A) United Church of Christ.
B) Clergy for Science.
C) Christian Science Church.
D) Scientists for Christ.
15) The Christian Science Monitor is known for its
A) solution-based journalism.
B) sensational coverage of world affairs.
C) preachy style of journalism.
D) crossword puzzle.
16) Who founded the Christian Science Monitor?
A) Rupert Murdoch
B) Mary Baker Eddy
C) Helen Gurley Brown
D) Joseph Pulitzer
17) Which of the following has NOT been considered as an alternative to traditional ways of funding
mass media in the U.S.?
A) changing the U.S. tax code to encourage family ownership of media companies.
B) using excise taxes on other products to subsidize media companies..
C) transferring ownership from for-profit businesses to nonprofit foundations..
D) promoting university-based journalism centers as news producers..
18) Skeptics fear that if community foundations took over the operation of local newspapers, the
papers would
A) emphasize favorable publicity for the community instead of hard-hitting news.
B) increase the price for consumers.
C) not allow advertising of goods and services.
D) reduce thescope of their offerings and not cover as much non-local news.
19) The largest example of a successful media cooperative is
A) the Christian Science Monitor.
B) NBC and MSNBC.
C) the Associated Press.
D) Comcast/NBCUniversal.
20) The Associated Press began in 1848 as the Harbor News Association with the primary
responsibility of
A) collecting information from foreign newspapers.
B) meeting transatlantic ships to pick up the mail for New York newspapers.
C) sharing news stories with other New York newspapers.
D) consolidating news coverage with press pools.
21) One of the main financial concerns about nonprofit organizations purchasing newspapers is
that
A) subscription sales would decrease.
B) advertisers would be resistant.
C) the cost of replacing aging printing presses would be more than nonprofits could bear.
D) employees would expect and demand improved and more expensive benefits.
22) Because of its inherent high costs, many newspapers have abandoned
A) celebrity reporting.
B) financial reporting.
C) consumer reporting.
D) investigative reporting.
23) Global News Enterprises, the Center for Public Integrity and ProPublica are examples of
journalism-oriented
A) cooperatives.
B) subsidiaries.
C) nonprofits.
D) conglomerates.
24) The Medill Innocence Project is probably the most widely-publicized program that relies on
__________ to research and generate news content.
A) seasoned journalists on leave from their employer
B) university students
C) freelance journalists and lawyers
D) retired reporters and editors
25) Family-owned media have increasingly declined in number because
A) fewer heirs are interested in media companies today than in the past.
B) inheritance taxes inhibit bequeathing the family business to heirs.
C) media chains are no longer interested in buying family-owned media.
D) recent changes in the law prevent transfer of ownership within families.
26) One way U.S. government policy historically has NOT favored the print media over other types
of business is
A) special reduced postal rates for printed materials.
B) favorable tax treatment for joint operating agreements between newspapers.
C) government subsidies to help newspapers pay for printing paper.
D) free delivery of weekly newspapers by the postal service.
27) The first reduced U.S. postal rate for the mass media was created in
A) 1789.
B) 1845.
C) 1879.
D) 1903.
28) Newspaper and magazines now qualify for special second-class postage rates if
A) they contain substantive news content.
B) less than 70 percent of their content is advertising.
C) they meet strict editorial guidelines.
D) they meet page-size and weight limits and are pre-sorted and bundled in ZIP code order.
29) The 1927 Federal Radio Act authorized the federal government to
A) regulate the type of content that could be carried over the airwaves.
B) eliminate the National Association of Broadcasters.
C) provide tax breaks to keep financially-troubled radio stations on the air.
D) issued license to radio stations and regulate the over-crowded airwaves.
30) The 1927 Federal Radio Act was based on the
A) scarcity model.
B) marketplace model.
C) capitalist model.
D) public-interest model.
31) The National Association of Broadcasters was initially formed to
A) ensure that broadcasters received the same preferred tax treatment as newspapers.
B) prevent television stations from gaining an advantage over radio stations.
C) give advertisers one source where they can buy time on any radio or television station.
D) reduce the chaos of over-crowded airwaves by regulating radio broadcasters.
32) The Newspaper Preservation Act of 1970 allowed newspapers to
A) deliver newspapers at reduced postage.
B) share editorial content.
C) combine non-news operations without violating anti-trust laws.
D) merge in a way that guaranteed at least one would financially survive.
33) State laws in many states require each county to designate an existing paper as an “official
newspaper” which then requires
A) the paper to report on all public meetings and policy decisions by government agencies.
B) the paper to provide equal coverage to all candidates for political office.
C) government officials to respond to questions from reporters for that paper.
D) government agencies to purchase advertising space in that paper for public announcements.
34) Legals are
A) news items regarding police and courts.
B) paid advertising required by law.
C) marriage, divorce and business announcements.
D) on-air acknowledgments of non-commercial sponsors.
35) Joan Kroc of the McDonald’s fortune gave $200 million to
A) Columbia Broadcasting System.
B) National Public Radio.
C) Public Broadcasting System.
D) ProPublica.
36) In terms of public broadcasting, underwriting means
A) paying for a public announcement that is required by law.
B) providing a generous non-cash donation..
C) making a contribution that receives on-air acknowledgements from the station.
D) paying a service charge to become a “member of the station.”
37) When PBS sells DVDs of its programs and spin-off products, this activity is
A) micromarketing.
B) advertising.
C) a fund drive.
D) an auxiliary enterprise.
38) Historically, the transformation of a technological invention into a mass medium that
successfully reaches a mass audience has largely been the result of
A) trial and error.
B) the clear vision of the inventor.
C) a pre-existing need or specific purpose for the invention.
D) a single massive infusion of cash.
39) The first three phases in the process of turning a new technology into a successful mass media
industry include all of the following EXCEPT
A) Inspiration – the spark of an idea about a new way to communicate, i.e., a new medium.
B) Invention – creating new equipment and/or processes needed to operate a new medium.
C) Entrepreneurship – developing a viable way to make money from a new mass medium.
D) Industry – imitators arise to compete with the pioneers in the new medium.
40) The fourth of the five phases in the evolution of a mass medium from its infancy to being past
its prime is called
A) Expansion.
B) Maturation.
C) Proliferation.
D) Stratification.
41) Steve Jobs co-founded
A) Google.
B) Apple Computer.
C) Microsoft.
D) News Corp.
42) An industry dominated by a few companies is called
A) a monopoly.
B) conglomerated.
C) an oligopoly.
D) saturated.
43) The continuing trend in mass media ownership is the
A) consolidation into fewer but bigger companies dominating each industry.
B)resurgence of family-owned companies.
C) break-up of large companies into smaller spin-off ones.
D) increasing regulation of media ownership changes by the government.
44) Trade groups usually are formed when
A) massive layoffs unite workers across company lines.
B) related companies unite to achieve common goals.
C) unions threaten a strike that will affect an entire industry.
D) business revenues decline.
45) According to Andy Grove, the final stages of an aging industry follow a predictable three-stage
course that occurs in the this order:
A) ignore new challenges, radical reforms, and resist change.
B) resist change, ignore new challenges, and radical reforms.
C) ignore new challenges, resist change, and radical reforms.
D) resist change, radical reforms, and ignore new challenges.
46) The following are all trade groups EXCEPT
A) theMotion Picture Association.
B) the Association of American Publishers.
C) the Recording Industry Association of America.
D) the American Federation of Labor and Congress of Industrial Organizations.
47) Critics concerned about how much influence mass media trade groups seem to exert on
government regulators and the legislative process often point out
A) how ill-prepared the regulators are for doing their jobs.
B) that most media executives earn much larger salaries than the regulators.
C) the “Washington turnstile” that moves people back and forth between jobs in the media and
government jobs as regulators for those same media.
D) the enormous political power and huge amounts of money that PACs and other special interest
groups use in lobbying for new laws and regulations.
48) Despite concerns about government involvement in the mass media, one of the best examples
of the U.S. government offering direct financial support to mass media is
A) the BBC.
B) the Corporation for Public Broadcasting.
C) the FRC.
D) the Wall Street Journal.
49) Wireless delivery of digitized messages may represent the ultimate level in
A) audience fragmentation.
B) decentralization of media ownership.
C) mass media technology.
D) speed and ease of packaging messages for delivery.
50) In the eyes of critics like Senator Al Franken, the dangers of media conglomeration include all of
the following EXCEPT
A) a decline in family-ownership of mass media along with a rising corporate orientation.
B) large media corporations pay lower tax rates so the government collects less revenue.
C) profitability trumps community service and cultural enrichment.
D) a shift in focus toward emphasizing improved profits.
3.2 True/False Questions
1) Media mogul Rupert Murdoch is the financial brains behind Facebook.
2) Capitalism is a profit-driven system.
3) The primary revenue streams for mass media industries are user fees and sales.
5) Advertising generates most of the revenue for newspapers, magazines, radio and television.
6) Newspapers earn less from advertisers than readers.
7) Early in the 21st century, readership losses, primarily to the Internet, eroded confidence among
advertisers in using newspapers and magazines.
8) Google has consistently earned more revenue than any other U.S. media conglomerate.
9) The purchase of the Knight Ridder newspaper chain and the subsequent sale of some of its
newspapers by McClatchy is an example of divestiture.
10) Robert Murdoch built one of the planet’s largest media empires, which includes Fox television
networks.
11) Most of the 12,000 magazines in the United States are published by organizations that produce
and distribute them to select audiences.
12) The Christian Science Monitor is an example of a publication that is not sponsored by an
institution.
13) One of the alternative financial models for media companies that was carefully examined before
being totally rejected was the idea of using community foundations to operate them.
14) A cooperative is an organization owned and run jointly by members that share profits or
benefits.
15) The Associated Press is the largest news-gathering organization that is profit motivated.
16) Skeptics worry that community foundations owning newspapers might not provide detached
and neutral coverage.
17) The need to generate sufficient revenue to maintain infrastructure is an inhibiting factor when
a non-profit considers buying a for-profit business.
18) One form of journalism that is being abandoned by budget-strapped traditional media
companies is investigative journalism.
19) Several universities have started student-led, non-profit news organizations.
20) Family ownership of newspapers is increasing.
21) The death tax is another name for taxes on inheritances.
22) Government has favored mass media over other businesses through such policies as low postal
rates.
23) The sinking of the Titanic was the impetus for the U.S. government to begin regulating the
transmission of radio signals .
24) Early attempts at government regulation of radio were primarily driven by concerns over
public safety.
25) By the time the Federal Radio Act was enacted, the government was primarily concerned with
regulating the types of content that could be allowed on the airwaves.
26) The 1927 Federal Radio Act was in response to the increasing number of corporate takeovers of
small radio stations.
27) The Federal Radio Commission was set up to license radio stations and regulate who had access
to the airwaves.
28) The 1970 Newspaper Preservation Act brought stricter anti-trust regulation of newspapers.
29) When newspapers merge their production, distribution, advertising and business operations
with competing newspapers, they do so under a joint operating agreement.
30) The Newspaper Preservation Act of 1970 continues to play a key role in providing long-term,
economic stability for newspapers.
31) For a while at least, the Newspaper Preservation Act kept newspaper competition alive in more
than two dozen cities that already had competing daily newspapers.
32) New sources and combinations of revenue are being sought by the mass media as traditional
33) The Corporation for Public Broadcasting distributes funding to PBS and NPR.
34) Minnesota and New Mexico subsidize noncommercial radio.
35) Underwriting is the term commercial radio stations use instead of advertising.
36) Some online publications use a micropayment system where users pay a small fee for each
story they read instead of buying an entire issue.
37) Research is the first phase of the process in which a new mass medium evolves into maturity
and then beyond into a phase where it’s past its prime.
38) The process of turning a new media technology into a commercially viable mass medium has
generally involved costly and time-consuming false starts.
39) The entrepreneurial phase of a mass medium’s evolution requires the right combination of
vision, capital, and risk; even then, most new initiatives fail.
40) Consolidation occurs in most industries as they mature, and the mass media have been no
exception.
41) Oligopoly is the term to describe an industry characterized by multiple companies effectively
competing against each other.
42) Monopolies are now legal in the United States.
43) Trade groups are organizations created to achieve mutually beneficial goals by businesses
44) “Washington turnstile” is a derisive term for the way some people move back and forth
between government jobs regulating an industry and private sector jobs in that same industry.
45) The long-held belief that mass media must be free of the government for democracy to work is
being re-examined in light of economic conditions that threaten the existence of many media.
3.3 Short Answer Questions
1) The hugely successful media company founded by Mark Zuckerberg is __________.
2) __________ is an economic system with private owners operating trade and industry for profit.
3) Mass media derive income either by selling their products directly to the audience or
from__________.
4) Advertisers buy time from the broadcast media and __________ from the print media.
5) Venture capitalists are __________ who willing to risk their money by putting it into start-up
businesses or companies that are trying to expand rapidly.
6) The process of companies being brought into common ownership but remaining distinct entities
is called __________.
7) When a media chain sells some of its assets in troubled economic times, it’s called __________.
8) __________ is the national newspaper sponsored by the Christian Science church.
9) __________, the largest news-gathering organization in the world, is a cooperative owned and
operated by its members.
10) Dozens of __________ news organizations, such as ProPublica, the Center for Public Integrity, and
Global News Enterprises, emerged to produce investigative reports after budget-strapped
newspapers cut back on investigative reporting.
11) The Medill Innocence Project is just one example of news-gathering organizations that have
been created at __________.
12) The __________ is another name for a tax on inheritances.
13) One of the ways government has aided media is to give them __________ postal rates than other
businesses pay for delivery of their products.
14)Congress passed the 1927 __________ which created a government agency to license radio
stations.
15) A __________ under federal law permits competing newspapers to combine production,
distribution, advertising and business operations without violating anti-trust provisions.
16) __________are paid advertising required by law, and they are usually verbatim government
documents.
17) A(n) __________ is a small sum, generally billed with related charges on a credit card, for a news
item on the Internet.
18) __________ is the developmental phase in the evolution of a mass medium between its invention
and its emergence as an industry.
19) Over time, as industries continue to grow and mature, the number of competing companies may
begin to decrease as a result of __________ .
20) The descriptive term for a company thatdominates production and distribution in an industry
is __________.
21) The Association of American Publishers is an example of a(n) __________.
3.4 Matching Questions
Match each media organization in the left column with the appropriate person in the right column.
1) Apple
A) Mark Zuckerberg
2) Christian Science Monitor
B) Calvin Coolidge
3) Facebook
C) David Sarnoff
4) Federal Radio Commission
D) Rupert Murdoch
5) News Corp.
E) Steve Jobs
6) RCA and NBC
G) Mary Baker Eddy
Test Bank for Media of Mass Communication, 11/e
Match each organization in the left column with the most appropriate descriptor in the right column.
1) Wall Street Journal
A) Victim of the Dot_Com Bust
2) Time Warner
B) Media trade group
3) Gannett
C) Bought NBC Universal in 2011
4) Christian Science Monitor
D) Owned by News Corp.
5) Associated Press
E) Government licensed
6) Broadband Sports Network
F) Multi-media conglomerate
7) Comcast
G) Huge, but not yet a conglomerate
8) Google
H) Institutionally sponsored
9) National Association of Broadcasters
I) Cooperative non-profit
10) WLW Radio (Cincinnati)
J) USA Today owner
3.5 Essay Questions
1) Cite at least three reasons why some skeptics worry that ownership of media companies by
foundations and other non-profit entities might only be a temporary fix and not a sustainable model
for the long-term economic survival of financially troubled media. Explain why you agree or
disagree with these skeptics.
2) Discuss why some media experts would like to see a return to family ownership of mass media
companies, and explain why you agree or disagree with their view of these benefits. Also explain
how a change in inheritance tax laws could impact family-owned media companies.
3) Discuss three ways the government has provided special assistance or advantages to print media
companies that are not given to other types of business. Explain why you think these types of
special treatment are or are not justified.
4) Explain what it means to say the 1927 Federal Radio Act was based on a scarcity model.
Describe what that act did and its impact on the radio station operators of that time..
5) Discuss three of the new funding mechanisms that various media have turned to in recent years
to cope with decreases in their sales and/or advertising revenue. Identify at least three different
media companies that have tried one of more of these approaches and point out what they did.
6) One of the often overlooked benefits of trade groups is the industry-wide standardization they
promote. Describe at least two industry-wide standardizations or sets of technical standards that
were developed by mass media industry trade groups and explain how the benefits of these
standards extended far beyond the companies that comprise the industry.
7) Explain the basic difference between an oligopoly and a monopoly. Then discuss how these
terms apply to the current economic conditions within the various American mass media. Identify
which, if any, of our mass media are oligopolies and which, if any, are monopolies.