Question

Your company operates in a perfectly competitive market. You have been told that advertising can help you increase sales in the short run. Would you create an aggressive and expensive advertising campaign for your product? Fully explain why or why not. You cannot answer with a "yes, if…." Or "no if…" type of answer.

Answer 1

Advertisement doesn't exist in perfect competition markets. Perfect competition markets are theoretical only, since they do not exist in reality although some markets resemble or are similar, e.g. commodities. One of the characteristics of perfect competition markets is that every participant possesses perfect information regarding the products' characteristics and price. If everyone knows a product perfectly, then there is no reason why you should advertise it.

Step-by-step explanation: