The reason that profit-maximizing firms willingly incur the added expense of advertising is that they hope that successful advertising will increase profits by:
A)increasing average costs.
B)increasing marginal costs.
C)increasing supply.
D)increasing demand.

Question

Quizplus · Accepted Answer

Advertising is used to increase demand and attract more customers to a firm's products or services. By creating brand recognition and differentiation from competitors, advertising can lead to increased sales and higher profits. Therefore, the reason that profit-maximizing firms willingly incur the added expense of advertising is to increase demand and ultimately increase their profits. By increasing demand, successful advertising can enable a firm to increase its sales at a given price, thereby increasing total revenue and ultimately profits.

The Reason That Profit-Maximizing Firms Willingly Incur the Added Expense