BUISENESS MANAGEMENT
ADVERTISING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Advertising costs are deducted from product prices.
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Advertising costs are lower than production costs.
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Competition with other manufacturers might be reduced.
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Increased sales reduce unit costs of production
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Detailed explanation-1: -price level. On the one hand, advertising enhances product differentiation, which leads to a higher price. On the other hand, advertising reduces consumers’ search costs as it provides consumers with more product information, which leads to a lower price level.
Detailed explanation-2: -Some have argued that advertising provides information to consumers, such as information on prices or the existence of products (for example Butters 1977 or Stahl 1989). This information increases the degree of competition in a market, and thereby lowers consumer prices.
Detailed explanation-3: -Advertising is not at all directly concerned with production cost, but it has significant indirect impact on production cost. By boosting up the demand it provides an incentive for higher production, with the possibilities of economies of scale.
Detailed explanation-4: -By encouraging more buying, advertising promotes both job growth and productivity growth both to help meet increased demand and to enable each consumer to have more to spend.
Detailed explanation-5: -Data Envelopment Analysis?with recent important insights from statistics and econometrics studies, and find that online advertising improves the efficiency levels and that this effect is more pronounced in the long-term temporal framework.