4. The role of brand names and advertising Which of the following statements abo

Question

4. The role of brand names and advertising Which of the following statements about expenditures on advertising is true? When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality. O If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising. When a firm spends a small amount of money on advertising, this signals that the quality of the good is high. Read the following example and determine whether it illustrates a common critique or defence of advertising Kenji sees a commercial for a Brand X clothing company that depicts the wearers of the clothes out having a good time with friends. Although he doesn't peed new clothes, the commercial prompts him to buy a Brand X t-shirt. defence critique This illustrates a common of advertising.

Explanation / Answer

Answer 1: option 1: When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality.

Explanation: When a brand spends too much money on advertising, it sends the signal that the firm is very confident of the product and it is willing to back up the high quality with heavy advertisement expense. It shows that the firm is expecting the product to fulfill the needs of the consumers and recover all its costs.

Answer 2: Critique

Explanation: One critique of advertising is that it promotes consumerism and mindless consumption i.e. consumption without a real need.

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