In the framework of monopolistic competition, the way advertising works can be perceived as
A) causing a firm's perceived demand curve to become more elastic.
B) causing a firm's perceived demand curve to become more inelastic.
C) causing demand for the firm's product to increase.
D) causing both b and c to occur.

Question

Quizplus · Accepted Answer

Advertising in a monopolistic competition framework can make a firm's perceived demand curve more inelastic because it differentiates the product from its competitors, making consumers more loyal and less sensitive to price changes. Additionally, advertising can increase demand for the firm's product by raising consumer awareness and interest.

In the Framework of Monopolistic Competition, the Way Advertising Works