Spending a lot on advertising is a credible signal because it:
A. conveys the firm's confidence in the high quality of their product.
B. persuades the consumer to perceive high quality of a product, even if it doesn't exist.
C. conveys the firm's confidence in its ability to convince the consumer to buy.
D. None of these explains why advertising can be a credible signal.
D. None of these explains why advertising can be a credible signal.
You might also like to view...
Which of the following statements is true?
A) If both demand and supply increase there must be an increase in equilibrium price; equilibrium quantity may either increase or decrease. B) An increase in supply causes a change in equilibrium price; the change in price does not cause a further change in demand or supply. C) If demand decreases and supply increases one cannot determine if equilibrium price will increase or decrease without knowing which change is greater. D) A decrease in supply causes equilibrium price to rise; the increase in price then results in a decrease in demand.
The J-curve effect of a currency depreciation results is due to
A) the initial effect having positive effects on the current account balance. B) the value of imports increasing by more than the value of exports at the time of devaluation. C) exports and imports being totally unresponsive to changes in exchange rates. D) decreases in the dollar price of imports. E) None of the above.
An externality is a situation in which
A) private costs diverge from social costs. B) internal costs diverge from private costs. C) there are no social costs. D) the cost borne by the consumer is greater than the monetary price.
When an expansionary fiscal policy increases market interest rates and lowers gross private investment in an economy, it is called the: a. countercyclical effect. b. policy lag effect
c. multiplier effect. d. crowding out effect.