Advertising can impede economic efficiency when it

Question

Quizplus · Accepted Answer

Advertising can impede economic efficiency when it leads to greater monopoly power. This occurs when companies with large advertising budgets can use it to create barriers to entry and reduce competition, or when advertising creates a strong brand loyalty, making it difficult for new competitors to gain a foothold in the market. This can lead to higher prices, reduced innovation, and lower economic efficiency. However, advertising can also provide useful information to consumers about product quality, which can increase competition and economic efficiency.

Advertising Can Impede Economic Efficiency When It