What is the primary positive effect of advertising for consumers and the economy?
Explanation
While advertising has several potential negative effects, its main positive economic role is enhancing efficiency by providing consumers with information, which reduces search costs and can increase competition.
Other questions
Which of the following characteristics is NOT associated with monopolistic competition?
In the long run, what level of economic profit does a monopolistically competitive firm typically earn?
What does the term 'excess capacity' in monopolistic competition refer to?
Which of the following is a primary characteristic of an oligopolistic market?
An industry consists of four firms with market shares of 50 percent, 20 percent, 20 percent, and 10 percent. What is the Herfindahl index for this industry?
In a game theory payoff matrix for a duopoly, what is a 'dominant strategy'?
According to the kinked-demand curve model, how do rival firms react to a price change initiated by an oligopolist?
What is a cartel?
Which of the following is NOT listed as an obstacle to collusion among oligopolists?
An industry is comprised of two firms, RareAir and Uptown. If both pursue a high-price strategy, they each earn $12 million. If both pursue a low-price strategy, they each earn $8 million. If one firm charges a low price while the other charges a high price, the low-price firm earns $15 million and the high-price firm earns $6 million. What is the incentive for each firm to cheat on a collusive agreement to maintain high prices?
In the Game Theory Appendix, what is a 'Nash equilibrium'?
How does the demand curve for a monopolistically competitive firm compare to that of a pure monopolist and a pure competitor?
In the sequential game example between Big Box and Huge Box, if both firms build a store they each lose $5 million. If neither builds, they each have zero profit. If only one firm builds, it earns $12 million. What is the outcome if Big Box has a first-mover advantage and builds first?
According to the data on U.S. manufacturing industries, the four-firm concentration ratio for the beer industry is 91 percent. How is this industry classified?
What is the primary reason that a monopolistically competitive firm's long-run equilibrium is not productively efficient?
What is the primary reason that a monopolistically competitive firm's long-run equilibrium is not allocatively efficient?
What is the most likely outcome of a price war among oligopolists?
The Herfindahl index for the electronic computer industry is given as 2662, while the index for the tires industry is 1807. What does this suggest about the two industries?
In the Game Theory Appendix, what is the key difference between a one-time game and a repeated game?
What is the main benefit to society that may arise from monopolistic competition?
Which of the following best describes the practice of 'price leadership' in an oligopoly?
In the Game Theory Appendix, what is a credible threat?
What is the primary shortcoming of the kinked-demand curve model?
According to the prisoner's dilemma, why might two oligopolistic firms end up in a low-profit, low-price outcome even if a high-profit, high-price outcome is possible through collusion?