Final answer:
Increasing advertising and promotion expenses at your firm will result in higher operating expenses. In a perfectly competitive market, aggressive advertising may temporarily increase sales but isn't a sustained strategy. In finance, increasing the supply of loans leads to more loans being taken out.
Step-by-step explanation:
As the director of marketing at your firm, making a decision to increase advertising and promotions expenditures by almost 50% to counteract competitors' aggressiveness will primarily mean that operating expenses will rise. Advertising and promotions are typical operating costs, separate from production costs or financing structures like notes payable. It's essential to manage these expenses wisely to not detrimentally affect the firm's financial position while pursuing increased market share or customer awareness. If your company operates in a perfectly competitive market, creating an aggressive advertising campaign could indeed help increase sales in the short run. However, in a perfectly competitive market, all firms sell identical products, and the market price is beyond the control of individual firms. Aggressive advertising might differentiate your product temporarily, possibly allowing for some market power and higher sales, but this is not a guaranteed nor a long-term strategy. In the financial market, an increase in the supply of loans (Option C) or a rise in the demand for loans (Option A) can lead to an increase in the quantity of loans made and received. However, an increase in supply typically implies that more capital is available for borrowing at a given interest rate, encouraging more loans being taken out.