QAEconomics › Which best describes how advertising influences consumer choice in an oligopoly?
Q

Which best describes how advertising influences consumer choice in an oligopoly?

A) Advertising coaxes people to buy new products. B) Advertising alerts consumers to price reductions. C) Advertising undermines competition. D) Advertising informs brand knowledge.
A

An oligopoly is a situation where few companies dominate the market share offering a certain commodity. However, these companies don’t compete against each other on quality and price. There is a high entry barrier for entrants hence there are not many new products surfacing. The market participants will therefore push their goals and objectives by investing in their advertising because it informs brand knowledge (choice D).

An advertising strategy in an oligopoly is meant to familiarize consumers with the different brands used by the dominant companies. When customers are looking for an item with the same variety, it becomes easy for them to recognize the brand and pick it from the available choices.

7 months ago
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