26) A good that people must actually consume before they can determine qualities is called
A) a credence good.
B) a search good.
C) an experience good.
D) a persuasive good.
27) An experience good is a product
A) with qualities that consumers lack the expertise to assess without assistance.
B) that emphasizes the features of its product.
C) with characteristics that enable an individual to evaluate the product’s quality in advance of a
purchase.
D) that an individual must consume before the quality can be established.
28) A good with qualities that consumers lack the experience to assess without assistance is
called
A) a credence good.
B) a search good.
C) an experience good.
D) a persuasive good.
29) A credence good is a product
A) with qualities that consumers lack the expertise to assess without assistance.
B) that emphasizes the features of its product.
C) with characteristics that enable an individual to evaluate the product’s quality in advance of a
purchase.
D) that an individual must consume before the quality can be established.
30) All of Jill’s friends have been telling Jill that she must see a certain movie but she is not sure
that she will like it. The movie is a(n)
A) experience good.
B) credence good.
C) logo good.
D) search good.
31) John has just tried on the most comfortable pair of pants that he has ever known. The pants
are a(n)
A) experience good.
B) credence good.
C) logo good.
D) information good.
32) Harry needs to hire an accountant but does NOT know how to find a good one. The
accountant is a(n)
A) experience good.
B) credence good.
C) logo good.
D) search good.
33) Steve can tell if his car has been fixed or not—it works, or it doesn’t—but he cannot tell how
it was fixed. The car repair is a(n)
A) experience good.
B) credence good.
C) luxury good.
D) search good.
34) If a customer buys an airline ticket based only on the price of the ticket, then the airline ticket
is a(n)
A) experience good.
B) credence good.
C) inferior good.
D) search good.
35) The type of advertising that emphasizes the features of its product is
A) informational advertising.
B) persuasive advertising.
C) search advertising.
D) experience advertising.
36) The type of advertising that is used to induce a consumer to discover a previously unknown
taste for an item is known as
A) informational advertising.
B) persuasive advertising.
C) false advertising.
D) experience advertising.
37) Informational advertising is the type of advertising that
A) is used exclusively on television.
B) is used exclusively on radio.
C) emphasizes the features of a product.
D) is used to influence a consumer’s tastes and preferences.
38) Persuasive advertising is the type of advertising that
A) is used exclusively on television.
B) is used exclusively on radio.
C) emphasizes the features of its product.
D) is used to induce a consumer to discover previously unknown tastes and preferences.
39) Informational advertising is mostly used for
A) an inexperience good.
B) a search good.
C) an experience good.
D) a persuasive good.
40) Persuasive advertising is mostly used for
A) an inferior good.
B) a search good.
C) an experience good.
D) a persuasive good.
41) The type of advertising used for a search good is
A) informational advertising.
B) persuasive advertising.
C) search advertising.
D) experience advertising.
42) The type of advertising used for an experience good is
A) informational advertising.
B) persuasive advertising.
C) search advertising.
D) experience advertising.
43) When you see an advertisement on TV for a hair care product in which the actor using the
product is depicted as beautiful and happy, this is
A) informational advertising.
B) direct market advertising.
C) indirect market advertising.
D) persuasive advertising.
44) When you see a preview of a coming movie at the movie theater, this is
A) informational advertising.
B) direct market advertising.
C) indirect market advertising.
D) persuasive advertising.
45) The goal of advertising is to
A) increase the price elasticity of demand for the firm’s product.
B) reduce the price elasticity of demand for the firm’s product.
C) increase the standardization of the industry.
D) encourage firms to enter into the industry.
46) The goal of advertising is to
A) pay for public broadcasting.
B) differentiate a firm’s product.
C) overwhelm the buyer so they buy a firm’s product.
D) minimize cost curves for the firm.
47) Typically a mix of informational and persuasive advertising is used for
A) experience goods.
B) credence goods.
C) credible goods.
D) search goods.
48) Which statement is INCORRECT with respect to sales promotion and advertising?
A) Perfect competition differs from monopolistic competition in that no individual firm in a
perfectly competitive market will advertise.
B) A perfectly competitive firm, by definition, can sell all that it wants to sell at the going market
price.
C) A perfect competitor advertises a product that is different from the products that all other
firms in the industry are selling.
D) Advertising should be carried to the point at which the additional revenue from one more
dollar of advertising just equals that one dollar of marginal cost.
49) Advertising intended to reach as many consumers as possible, typically through television,
newspaper, or magazine ads is referred to as
A) interactive advertising.
B) direct marketing.
C) mass marketing.
D) subliminal advertising.
50) Which of the following is FALSE with respect to brand names and advertising?
A) Because “differentness” has value to customers, monopolistically competitive firms regard
their brand names as valuable.
B) Firms use trademarks—words, symbols, and logos—to distinguish their product brands.
C) Companies do not regard their brands as valuable private (intellectual) property because the
value cannot be quantified.
D) There is considerable shifting over time in the market value rankings of various U.S. product
brands.
51) Which of the following is most likely to be the subject of informational advertising?
A) a search good
B) a credible good
C) an experience good
D) an inexperience good
52) Advertising that is intended to alter a consumer’s tastes and preferences and induce the
customer to purchase a particular product is
A) persuasive advertising.
B) educational advertising.
C) informational advertising.
D) directional advertising.
53) An example of direct marketing is
A) the use of coupons in newspapers.
B) allowing the use of the product for 7 days before the consumer is billed for the product.
C) charging customers who pay with cash a different price than those using credit cards.
D) the use of personalized advertising by using mailing lists.
54) Out of all advertising spending, the largest share goes to
A) television ads.
B) false advertising.
C) direct marketing.
D) newspaper ads.
55) A product that must be actually consumed before the quality of the product can be
determined is a(n)
A) search good.
B) consumable good.
C) consumption good.
D) experience good.
56) Advertising intended to induce a consumer to discover a previously unknown taste or
preference is
A) persuasive advertising.
B) informational advertising.
C) direct advertising.
D) mass marketing advertising.
57) Products such as office supplies are examples of
A) experience goods.
B) simple goods.
C) search goods.
D) selective goods.
58) When a pharmaceutical company advertises that its allergy medication is clinically proven to
alleviate hay fever symptoms, the pharmaceutical company is engaging in
A) informational advertising.
B) trademark protection.
C) persuasive advertising.
D) direct marketing.
59) Explain why the amount that firms spend on advertising depends on the characteristics of
their products.
60) Explain how advertising can act as a signal.
61) Explain the difference between informational advertising and persuasive advertising. Give an
example of a product that would be the subject of each type of advertising and explain why that
type of advertising fits the product.
62) Why would Sunkist incur substantial costs to advertise and establish a brand name when the
quality of its oranges can easily be evaluated by consumers?
25.4 Information Products and Monopolistic Competition
1) If a monopolistically competitive firm selling an information product engages in marginal cost
pricing, it will
A) earn additional profits.
B) fail to earn sufficient revenues to cover its fixed costs.
C) lower costs.
D) break even.
2) The providers of information products typically
A) have low fixed costs.
B) have high marginal costs.
C) have high fixed costs.
D) have zero fixed costs.
3) In the long run, the price of information products in monopolistically competitive markets will
be equal to
A) zero.
B) MC.
C) AFC.
D) ATC.