In which of the following product markets are we likely to observe the largest amount of advertising?
A)markets with highly differentiated products
B)perfectly competitive markets
C)markets in which industrial products are sold
D)markets in which there is very little difference between different firms' products

Question

Quizplus · Accepted Answer

Markets with highly differentiated products, such as the soft drink industry, typically have a lot of advertising because firms need to create brand awareness to differentiate themselves from competitors. In perfectly competitive markets, firms are price takers and do not advertise as they cannot differentiate themselves. Industrial product markets often involve personal selling rather than advertising. In markets where there is very little difference between firms' products, advertising is less necessary as there is less reason to create brand awareness.

In Which of the Following Product Markets Are We Likely