Tread Inc., a sports shoe manufacturing company, began its campaign by spending one million dollars on advertising. Currently, Tread Inc. spends 200 million dollars on advertising. Initially, the advertisements contributed to the gradual increase in returns, but the company now confronts diminishing returns. In this scenario, which of the following phenomena explains Tread Inc.'s diminishing returns?

Question

Quizplus · Accepted Answer

The advertising response function explains how the initial investment in advertising contributed to the gradual increase in returns, but the subsequent increase in spending led to diminishing returns. The other choices do not accurately explain the phenomenon of diminishing returns in this scenario.

Tread Inc, a Sports Shoe Manufacturing Company, Began Its Campaign by by Spending