Are advertising and brand names efficient?
What will be an ideal response?
Advertising and brand names can increase consumer information about product differences and quality. This information increases consumers' wellbeing and increases efficiency. But advertising and creating a brand name also are costly endeavors. If the MSB from the advertising and brand names is greater than the MSC of the advertising and brand names, then advertising and brand names increase efficiency. But if the MSB from the advertising and brand names is less than the MSC of the advertising and brand names, then advertising and brand names decrease efficiency. Basically, if the additional benefit that consumer's gain from advertising and brand names exceed the costs, then advertising and brand names have a surplus for society and should be increased until their marginal social benefit equals their marginal social cost.
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What will be an ideal response?
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Answer the following statement true (T) or false (F)