Final answer:
option d.Advertising is seen as valuable for providing information but also criticized for creating false differentiation and potentially higher prices.
Step-by-step explanation:
The debate on advertising's value is multifaceted. On one hand, advertising is valuable for its role in providing free information about products and prices to consumers, helping them make informed decisions. On the other hand, it is criticized for creating a false sense of differentiation between products, which can support monopolistic competition, leading to potentially higher prices.
In the framework of monopolistic competition, advertising can make a firm's perceived demand curve more inelastic, allowing the firm to sell at higher prices, or it can shift the demand curve to the right, increasing the product's demand. This means a successful advertising campaign might lead to greater quantities sold or higher prices—or both—thus increasing a firm's profits. Yet, the Federal Trade Commission (FTC) mandates that advertising must be truthful; exaggerated claims are permitted to a degree, but facts must be accurate.
In conclusion, both statements A and B regarding the effects of advertising contain a level of truth, reflecting the complex impact advertising has within a competitive market economy.