Asked by Courtnie Marie on Jun 09, 2024
Verified
Monopolistic competitors often hire a celebrity spokesperson to advertise their product.One reason such advertising works is that:
A) celebrities are better informed about the relative merits of different products than are the rest of us.
B) consumers assume that the celebrity has researched the product and that the claims being made on his or her behalf are true.
C) the fact that a firm is willing to pay the large fees associated with celebrity advertising signals to consumers that it is a major company and that it is therefore likely to have a reliable product.
D) celebrities encourage other firms to enter the industry.
Celebrity Spokesperson
A famous individual who is paid to use their fame to help promote a product or service.
Monopolistic Competitors
Companies that have many competitors but try to differentiate their products from others to gain a competitive edge.
Celebrity Advertising
A marketing strategy that uses the fame of a celebrity to promote products or services, leveraging their influence to reach potential customers.
- Identify the function of advertising within the context of monopolistic competition and its impact on how consumers view products and the resulting market consequences.
Verified Answer
SG
Shacquille GayleJun 14, 2024
Final Answer :
C
Explanation :
Consumers often assume that a firm must have a reliable product if it is willing to pay a large fee for celebrity advertising. This is referred to as a signaling effect, which is when a company uses external cues to signal to customers that its product is of high quality. Celebrity endorsements are one example of a signaling effect. Consumers may also believe that the celebrity is knowledgeable about the product, but this is not necessarily true.
Learning Objectives
- Identify the function of advertising within the context of monopolistic competition and its impact on how consumers view products and the resulting market consequences.