Scenario 4-3 the Lightning Rod Is a Fishing Rod Being Introduced by Introduced

question 62

Multiple Choice

Scenario 4-3
The Lightning Rod is a fishing rod being introduced by Castaway Sports.At a preliminary meeting with its agency, the president of Castaway Sports mentions that the rod can improve casting distance for an average individual by more than 20 percent.The account executive asks if the president has data to support this, and the president says "Yes." The agency proceeds to produce a series of television spots featuring a well-known sports celebrity using the rod and rating it as excellent.The spots run on network television and trumpet the improved casting distance that the rod provides.The slogan of the spots is "Lightning Rod-The Finest Rod Ever Cast." After about a week, a competitor questions whether the rods really offer the improved performance Castaway Sports claims, and decides to file a complaint with the FTC.
-(Scenario 4-3) The FTC investigates the claim of 20 percent more casting distance when using the Lightning Rod.Castaway Sports admits that it has no actual data to support the claim but believes it to be true.Still, the FTC rules that should stop running the ads.This is an example of

• A)affirmative disclosure.
• B)a cease-and-desist order.
• C)a consent order.
• D)corrective advertising.

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Definitions:

Risk Averse

The tendency of individuals or entities to prefer certainty over uncertainty, often choosing safer options over riskier ones to minimize potential losses.

Adverse Selection

A situation where sellers have information that buyers do not, or vice versa, often resulting in a market failure.

Utility Function

Represents a mathematical model in economics which shows preferences over a set of goods and services, depicting satisfaction levels of consumers.

Probability

The measure of the likelihood that an event will occur, often expressed as a number between 0 and 1.