According to One Theory, Advertising Sends a Signal to Consumers

question 139

Multiple Choice

According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that

• A)the actual quality of the product is irrelevant.
• B)the existence of an expensive advertisement is more important than the content of the advertisement.
• C)advertising is not in the best interest of society.
• D)it is irrational for firms to pay famous people large amounts of money to appear in their advertisements.

---

Definitions:

Beginning Inventory

The market value of products prepared for sale at the initiation of a bookkeeping period.

Merchandise Inventory

Goods or products that a company holds for the purpose of resale to customers, recorded as a current asset on the balance sheet.

Income Summary

is an account that aggregates all revenue and expenses during an accounting period, used to transfer the net income (or loss) to the capital account.

Freight-in

represents the cost of transporting goods into a business, typically considered as part of the cost of goods sold.