Advertising may be an efficiency-enhancing activity when it results in the following, except when it
A) enhances competition among sellers.
B) facilitates the introduction of new products.
C) increases sales thereby allowing firms to obtain economies of scale.
D) makes buyers more brand-attached, making their demand less elastic.

Question

Quizplus · Accepted Answer

When advertising makes buyers more brand-attached and their demand less elastic, it can harm efficiency as it reduces competition among sellers and makes it difficult for new firms to enter the market. This leads to higher prices and reduced choices for consumers.

Advertising May Be an Efficiency-Enhancing Activity When It Results in the Following