Question

irms and these expenditures by multiple firms are often self-canceling rather than productive. ______________ is often challenged as being an inefficient allocation of resources because it promotes monopoly power for some firms and these expenditures by multiple firms are often self-canceling rather than productive.

Answer 1

Advertising is often challenged as being an inefficient allocation of resources because it promotes monopoly power for some firms and these expenditures by multiple firms are often self-canceling rather than productive.

What exactly is advertising?

Despite people's ignorance, advertising is always present. Every media available in today's world is used by advertising to spread its message. It achieves this through several mediums, including television, print (newspapers, magazines, journals, etc.), radio, press, internet, direct marketing, billboards, mailers, competitions, sponsorships, posters, outfits, events, colors, sounds, images, and even people (endorsements).

The advertising sector is made up of businesses that advertise, agencies that produce the ads, media that run them, and a large number of individuals who take the ads all the way to the consumer or recipient, including copy editors, visualizers, brand managers, researchers, creative minds, and designers.

How does monopolistic power work?

Market power and monopoly power both relate to a company's capacity to set a price above its marginal cost. Monopoly power often occurs in markets with low demand elasticity and high entry barriers.

Monopoly Power Sources:

The elasticity of the product's demand, the presence of economies of scale, the ownership of a vital resource, the existence of legislative restrictions, etc. are all significant determinants or sources of monopoly power.

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