Advertising is an efficient solution to the problem of nonexcludability and nonrivalry.

Question

Quizplus · Accepted Answer

Advertising allows firms to differentiate their products from their competitors in order to make them excludable. Additionally, advertising can increase demand for a product, without reducing the quantity available to other consumers, thus solving the problem of nonrivalry. Therefore, advertising is an efficient solution to the problem of nonexcludability and nonrivalry.

Advertising Is an Efficient Solution to the Problem of Nonexcludability