Question

Many firms advertise. What effect does advertising have on firm​ profits? One possible effect of advertising is to:_________

a. increase profits by decreasing the cost of production.
b. increase profits by shifting the demand curve for the product to the right.
c. increase profits by making the demand curve for the product more elastic.
d. increase profits by making the supply curve for the product more inelastic
e. increase profits by allowing the firm to produce the same amount of output with fewer inputs.

Answer 1

Advertising can increase a firm's profits by shifting the demand curve to the right, which allows for selling more products or at higher prices.

Step-by-step explanation:

One possible effect of advertising is to increase profits by shifting the demand curve for the product to the right. This occurs because advertising helps in explaining to people or influencing their perception that the products of one firm are differentiated from those of another firm. In a monopolistic competition framework, advertising either makes a firm's perceived demand curve more inelastic, or it leads to an increase in demand for the firm's product by causing the perceived demand curve to shift to the right. A successful advertising campaign can allow a firm to sell a greater quantity of its products, charge a higher price, or both, thereby increasing its profits.

Answer 2

Option b: Increase profits by shifting the demand curve for the product to the right

Step-by-step explanation:

Marketing is simply all the activities necessary for a firm to sell a product to a consumer. Firm engages in marketing to make their brand or product known.

Advertising has a whole lot of effect in the society at large. There are economic effect, social effect and others.

effects of advertising on the prices of goods and service includes exerting an upward pressure on prices that is the Cost of advertising is passed along to consumers and Advertising makes us less price sensitive) and exerting a downward pressure on prices may lead to economies of scale and Lowers the cost of sales.

Social Effects of Advertising is that it is manipulative and promotes unnecessary consumption,Advertising makes us more intelligent consumers and promotes worthwhile social causes.