advertising however can produce more permanent gains in market share because

Advertising however can produce more permanent gains

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advertising, however, can produce more permanent gains in market share because they cannot be duplicated as quickly and completely as price reductions. Oligopolists have sufficient financial resources to engage in product development and advertising. For most oligopolists, the economic profits earned in the past can help finance current advertising and product development. Positive effects - Advertising is an efficiency-enhancing activity. It is a relatively inexpensive means of providing useful information to consumers and thus lowering their search costs. By enhancing competition, advertising results in greater economic efficiency. By facilitating the introduction of new products, advertising speeds up technological progress. By increasing sales and output, advertising can reduce long-run average total cost by enabling firms to obtain economies of scale. Negative effects - Advertising is sometimes based on misleading and extravagant claims that confuse consumers rather than enlighten them. Indeed, in some cases advertising may well persuade consumers to pay high prices for much-acclaimed but inferior products, forgoing better but unadvertised products selling at lower prices. 14.Give one example of how the principles in this chapter currently impact your life or relate to your chosen career. These principles are again important for a potential business owner who may need to engage in competition and rivalry with other firms.
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