On November 7, 1996, the Distilled Spirits Council of the United States decided to end its voluntary ban on television and radio liquor advertisement. The ban on hard liquor advertising had been in effect since 1936 for radio and 1948 for television
Assuming that advertising is a prisoner's dilemma, and that if one company advertises, its competitors will also choose to spend money to advertise, did the lifting of this ban likely increase or decrease the profits of hard liquor companies? Briefly explain.
What will be an ideal response?
If advertising is a prisoner's dilemma, then lifting the ban on advertising hard liquor on television and radio likely decreased the profits of hard liquor companies following the lifting of the ban.
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Price cap regulation
A) does not provide incentives to firms to minimize their costs because firms cannot change prices. B) sets the maximum price these firms can charge. C) gives firms the incentive to exaggerate their costs. D) Both answers A and C are correct. E) Both answers A and B are correct.
A student wrote: "Monopolistic competition is a market structure in which a small number of firms compete by making an identical product." If you were the instructor, how would you correct this statement?
What will be an ideal response?