Question

Critics charge that high advertising and promotion costs unnecessarily increase retail prices. Marketers most likely respond to this criticism by arguing that advertising ________?

1) reduces production costs
2) increases brand awareness
3) decreases competition
4) has no impact on prices

Answer 1

Marketers argue that advertising increases brand awareness and can lead to increased demand, allowing firms to sell more or charge higher prices, thereby increasing profits.

Step-by-step explanation:

Marketers most likely respond to the criticism that high advertising and promotion costs unnecessarily increase retail prices by arguing that advertising increases brand awareness. In the framework of monopolistic competition, advertising can cause a firm's perceived demand curve to shift to the right, leading to increased demand for the product. A successful advertising campaign can allow a firm to sell a greater quantity or charge a higher price, which can ultimately increase its profits.