Which of the Following Statements Is Indicative of the "Advertising

question 26

Multiple Choice

Which of the following statements is indicative of the "advertising equals market power" school of thought on advertising's role in the economy?

• A)Advertising informs consumers about product attributes but does not change the way they value those attributes.
• B)Advertising causes consumers to become more price sensitive and buy best "value."
• C)Advertising affects consumer preferences and tastes, changes product attributes, and differentiates the product from competitive offerings.
• D)Advertising makes entry possible for new brands because it can communicate product attributes to consumers.
• E)Consumers can compare competitive offerings easily and competitive rivalry increases.

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Definitions:

Scrap Value

The estimated resale value of an asset after its useful life is over and it is deemed to no longer be usable for its intended purpose.

Contribution Margin

The difference between sales revenue and variable costs of a product, indicating how much contributes towards covering fixed costs and earning profit.

Fixed Costs

Expenses that do not change with the level of production or sales over a short period, such as rent, salaries, and insurance.

Marginal Costs

The additional cost incurred from producing one additional unit of a product or service.