If signalling is applied to advertising:
A)not all firms heve the same incentive to atvertise
B)firms ignore the possibility of repeated customers
C)it is irrational for a firm with a good product to pay for the cost of the signal
D)a Firm with a good product reaps a relatively small benefit from atvertising

Question

If signalling is applied to advertising:
A)not all firms heve the same incentive to atvertise
B)firms ignore the possibility of repeated customers
C)it is irrational for a firm with a good product to pay for the cost of the signal 
D)a Firm with a good product reaps a relatively small benefit from atvertising

Quizplus · Accepted Answer

Signalling applied to advertising suggests that firms use advertising as a signal of quality to differentiate themselves from lower quality competitors. Therefore, firms with higher quality products have a stronger incentive to advertise as advertising serves as a credible signal of their product's quality. As a result, not all firms have the same incentive to advertise.

If Signalling Is Applied to Advertising