Which of the following is true about advertising by a firm?
A) It is not always successful in increasing demand for a firm's product.
B) It attempts to increase demand and to make demand more inelastic.
C) It may reduce per unit costs of production when economies of scale are experienced.
D) All of the above.

Question

Quizplus · Accepted Answer

A) It is true that advertising is not always successful in increasing demand for a firm's product. Sometimes, the advertising may not reach the intended audience or fail to convince them to purchase the product.
B) The main objective of advertising is to increase demand for a firm's product and make demand more inelastic. By creating brand awareness, establishing product differentiation, and building customer loyalty, advertising can reduce the price sensitivity of consumers and make them more willing to pay a premium price for the product.
C) Advertising alone may not reduce per unit costs of production when economies of scale are experienced. However, advertising can complement economies of scale by increasing sales volume and spreading fixed costs over a larger output, leading to a lower average cost per unit.

Which of the Following Is True About Advertising by a Firm