Final answer:
Distinctive products in monopolies lead to a focus on public relations advertising to establish and promote a unique brand name. Monopolistic competition and strong brand recognition, such as that achieved by Coca-Cola or Pepsi, play crucial roles in market dominance. Advertising can both make a firm's demand curve more inelastic and increase overall demand, impacting profits.
Step-by-step explanation:
Monopolies that have distinctive products engage mainly in public relations advertising to differentiate their offerings from competitors. In contexts of monopolistic competition and oligopoly, creating a recognizable brand name and marketing campaign can be as crucial as the product itself, since the technical production might not be the most challenging aspect. Companies like Coca-Cola or Pepsi dominate the market not just because they produce fizzy drinks, but because they have established strong brand recognition through extensive advertising efforts.
Effective advertising can lead to a more inelastic demand curve or increase the demand for a firm's product. In an industry with many competitors, such as the restaurant business with over 600,000 establishments in the United States, each firm represents a mini-monopoly due to the unique style or flavor they offer, which further emphasizes the role of advertising in distinguishing these products.
However, there's a phenomenon where advertising expenditures by competing firms may cancel each other out, leaving the industrial position unchanged, a situation often observed in competitive advertisements. The success of these campaigns can result in a firm's ability to sell more or at higher prices, thereby increasing profits.