Compare the Benefits and the Costs of Advertising

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The Answer is Advertisements allow firms to achieve and maintain market power.It allows firms to convince consumers that their products are different from and better than those of their competitors.Artificial product differentiation brought about by advertisements not only increases the demand for the firm's product but also makes the demand more price inelastic.Thus firms enjoy greater market power.
Sometimes,advertisements operate as a barrier to entry.If a new firm attempts to enter a profitable industry,it may find that advertising by the established firms has created a captive audience of consumers who are reluctant to try a new brand.On the other hand,advertising can also be a means of breaking into an entrenched market,giving an entrant a way to increase sales quickly so that economies of scale can be realized.
In its most extreme form,criticism of advertising holds that it manipulates consumers and leads them to choose products they do not want or need.In this view,consumers' tastes are not formed independently,but are actually created by advertisers.

Compare the Benefits and the Costs of Advertising

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