Advertising could lead to lower prices if

Question

Quizplus · Accepted Answer

Advertising can lead to lower prices if economies of scale (cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale) are achieved and surpass the costs of advertising. This is because the increased demand from effective advertising can lead to higher production volumes, which in turn can reduce the cost per unit due to economies of scale. This cost saving can be passed on to consumers in the form of lower prices.

Advertising Could Lead to Lower Prices If