Explain how advertising influences the demand for a firm's product
What will be an ideal response?
If a firm's advertising program is successful, it will shift the firm's demand curve rightward in the short run. But if this shift in demand increases economic profit, it will attract firms to enter the industry, shifting each existing firm's demand curve back leftward as they each lose some market share. In the long run, each firm makes zero economic profit, and demand for the firm's product will not increase through advertising.
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If the interest rate increases, there is a(n)
A) increase in the demand for money. B) decrease in the demand for money. C) increase in the quantity of money demanded. D) decrease in the quantity of money demanded.
Use the above figure. The total cost of producing at the optimal level for the monopolistically competitive firm is
A) $285. B) $255. C) $180. D) $300.