Final answer:
The claim that trade advertising is focused on promoting sales to the end consumer is false. Trade advertising targets the distribution channel, while consumer advertising aims directly at the consumer. The FTC regulates advertising claims to protect consumers, underscoring the 'Caveat emptor' principle.
Step-by-step explanation:
The statement that trade advertising focuses on sales promotion efforts directed toward the ultimate consumer is false. Trade advertising is actually aimed at members within the distribution channel, such as wholesalers, distributors, and retailers. Its purpose is to encourage these entities to carry a product and promote it to the end consumer. On the other hand, consumer advertising is the type that is directed towards the ultimate consumer to persuade them to purchase the product.
Advertising practices have evolved over time. With increased competition and a variety of choices available to consumers, companies invest heavily in advertising to distinguish their goods from others. The Federal Trade Commission (FTC) plays a role in ensuring that factual claims made in advertisements are true to some extent, and while exaggerated or ambiguous language might be allowed, outright untrue facts are not. This dynamic is reflected in the caveat of Caveat emptor, suggesting that consumers should remain vigilant.
In monopolistic competition, advertising can affect a firm’s perceived demand curve by making it more inelastic or by shifting the demand curve to the right. An effective advertising campaign can increase a company's profits, either by selling a greater quantity of a product, charging a higher price, or both.