Why Would Perfectly Competitive Industries Advertise Even Though Individual Firms

question 59

Multiple Choice

Why would perfectly competitive industries advertise even though individual firms do not?

• A) Even though the output of an individual firm would be considered homogeneous to other firms,the industry output would be differentiated (for example,Florida orange juice versus imports).
• B) Individual perfectly competitive firms don't need to advertise because they already have market power,but the industry would need to advertise.
• C) Government price supports exist for most perfectly competitive producers,so they don't need to advertise,but industry price supports don't generally exist.
• D) Industries advertise because they pay for commercials and it allows consumers to watch TV and listen to the radio for "free."
• E) Individual firms produce perfectly differentiated output,but the industry produces homogeneous output that needs to be differentiated.

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Definitions:

Circular Flow Model

An economic model illustrating the flow of goods, services, and funds between households and firms in an economy.

Resource Market

A market where primary factors of production such as labor, capital, and natural resources are bought and sold.

Product Market

Describes a marketplace where final goods or services are bought and sold, distinguishing it from a factor market.

Enterprise Success

The achievement of desired business outcomes, such as profitability, growth, market share, or innovation, by a company or business enterprise.