Final answer:
Firms spend money on marketing to boost sales, increase brand visibility and awareness, and create barriers to entry for competitors. In monopolistic competition, this can make demand more inelastic or increase overall demand, thus increasing a firm's profits.
Step-by-step explanation:
Firms are willing to spend lots of money on marketing strategies, such as very expensive Super Bowl ads, to achieve multiple objectives. The primary reasons include boosting sales, enhancing brand visibility and awareness, and reducing competition by establishing a firmly entrenched brand presence that can be difficult to dislodge. Large advertising budgets not only attract more customers by making the demand curve for a firm's product to shift to the right but can also act as a barrier to entry for the competition, dissuading new entrants from competing in the space.
In the context of monopolistic competition, advertising can cause a firm's perceived demand curve to become more inelastic, or steeper. Alternatively, it can cause the demand for the firm's product to increase. Either way, a successful advertising campaign may allow a company to sell a greater quantity or to charge a higher price, leading to higher profits.