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:

Profit and Loss Statement

A financial statement that summarizes revenues, costs, and expenses incurred during a specific period, usually a fiscal quarter or year.

Total Contribution Margin

The difference between total sales revenue and total variable costs, indicating how much revenue is available to cover fixed costs and generate profit.

Sold Units

The total number of units of a product that have been sold during a specific period.

Break-Even Point

The point at which total costs and total revenues are equal, meaning there is no profit or loss, and initial investments begin to be recovered.