Which of the following is true about advertising?
A) If monopolistically competitive firms compete through advertising, that creates brand loyalty, then advertising can be an effective entry cost.
B) Advertising may be the only way that a new entrant can penetrate a market dominated by long-established firms.
C) Advertising has no impact on entry costs or market structure.
D) Both a. and b. above are correct.

Question

Quizplus · Accepted Answer

Both option A and B are true statements about advertising. Monopolistically competitive firms use advertising to create brand loyalty and differentiate themselves from their competitors, making advertising an effective entry cost. Additionally, advertising can be the only way for a new entrant to compete with established firms that have already established a loyal customer base. Therefore, choices A and B are both correct. Option C is false as advertising can have a significant impact on entry costs and market structure in certain industries.

Which of the Following Is True About Advertising