5. The role of brand names and advertising Which of the following statements abo

Question

5. The role of brand names and advertising Which of the following statements about expenditures on advertising is true? If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality When a firm spends a small amount of money on advertising, this signals that the quality of the good is high. Read the following example and determine whether it ustrates a common critique or defense of advertising. Lorenzo sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends Although he doesn't particularly need new clothes, the commercial prompts him to buy a Brand X t-shirt. This illustrates a common of advertising

Explanation / Answer

Right answer is :

1)

when a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality.

Through advertisement, producer wants to signal that its product has quality.

2)

Since here advertisement is motivating people to buy products. Thus, Ads are most effective medium to increase demand.

Thus right answer would be:

Illustrate a common Defense of advertisting.  

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