Ashlee Patterson, a student of economics, argues that product differentiation by these firms will reduce economic welfare. However, Tony Prescott, her friend, disagrees. According to Tony, social welfare will increase because consumers now have more choices. While claiming that social welfare will increase because consumers now have more choices Tony is ignoring the fact that: A. product differentiation allows firms to enjoy monopoly power. B. producer surplus increases when firms differentiate their products from what their rivals offer. C. different people have different preferences. D. efficiency under monopoly is lower than efficiency under monopolistic competition. E. firms selling identical products face perfectly elastic demand curves.

Total marketing effort is a term used to describe the critical decision factors that affect demand: price, advertising, distribution, and product quality. define the variable x to represent total marketing effort. a typical model that is used to predict demand as a function of total marketing effort is based on the power function: d = axb suppose that a is a positive number. different model forms result from varying the constant b. sketch the graphs of this model for b = 0, b = 1, 0< b< 1, b< 0, and b> 1. (we encourage you to use excel to do this.) what does each model tell you about the relationship between demand and marketing effort? what assumptions are implied? are they reasonable? how would you go about selecting the appropriate model?