Question

Which of the following statements is true:

a. Advertising is an important aspect of monopolistic competition and oligopoly because there is product homogeneity in these industries. there are significant substitution possibilities in these
industries. price changes are not allowed. brand distinction encourages customer loyalty, which increases profits.
b. Advertising promotes efficiency and benefits consumers by providing information about new products, reducing the number of firms in the industry, and raising average revenue.
c. Providing information about new products, increasing sales and output, and lowering average total cost.
d. Helping consumers determine their preferences and limiting the number of products firms have to produce.
e. Helping consumers determine their preferences and increasing the number of products firms have to produce.

Answer 1

The correct answer is the option A.

Step-by-step explanation:

To begin with, the monopolistic competition is a type of market characterized by a large number of competitors and products that are mostly heterogeneous due to the fact that all the firms try to achieve the differentation of its product by aggregating unique features or changing the price as much as they can.

Secondly, a oligopolistic market is the type that is characterized by a few number of competitors that dominate the market and have a great influece on the price and that are very dependant on the other company's action.

Finally, in those types of markets the advertising is a huge weapon they can use due to the fact that as there are products that are heterogeneous they must capture the client's attention and try to make them more loyal to the brand.