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Question
Macroeconomics
Posted 3 months ago

Advertising is most likely to be used in which kind of market?
Choose 1 answer:
(A) monopolistic competition
(B) perfect competition
(C) oligopoly
(D) monopoly
(E) perfect price discriminating monopoly
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Answer from Sia
Posted 3 months ago
Solution
a
Market Types and Advertising: Different market structures have varying levels of competition, product differentiation, and barriers to entry, which influence the use of advertising
b
Monopolistic Competition: This market structure is characterized by many firms, product differentiation, and free entry and exit. Firms use advertising to differentiate their products and attract customers
c
Perfect Competition: In perfect competition, there are many firms selling identical products, and advertising is less likely because products are homogeneous and firms are price takers
d
Oligopoly: An oligopoly has a few large firms that dominate the market. Advertising can be used to compete without changing prices, but it's not as prevalent as in monopolistic competition
e
Monopoly: A monopoly has one firm that controls the market. Advertising is used less frequently because there is no direct competition, but it may be used to increase overall demand
f
Perfect Price Discriminating Monopoly: This firm charges each consumer the maximum they are willing to pay, eliminating consumer surplus. Advertising is unnecessary because the firm already maximizes profit by perfect price discrimination
Answer
(A) monopolistic competition
Key Concept
Advertising in Market Structures
Explanation
Advertising is most likely to be used in monopolistic competition because firms need to differentiate their products to gain a competitive edge.

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