If signalling is applied to advertising:
A)a firm with a good product reaps a relatively large benefit from advertising
B)firms ignore the possibility of repeated customers
C)it is irrational for a firm with a good product to pay for the cost of the signal
D)firms with poor products can copy this signal easily

Question

Quizplus · Accepted Answer

Signalling in advertising allows firms with good products to signal their quality to potential customers. This can lead to a relatively large benefit for the firm, as customers are more likely to buy their product over competitors. Additionally, firms can use repeated advertising to signal reliability and commitment to quality, which can further increase the benefit of advertising.

If Signalling Is Applied to Advertising