Question

Which of the following is considered a likely result from advertising? A. Brand names offer consumers no new information about product quality. B. Signaling theory suggests that expensive testimonials from celebrities indicate a higher quality product. C. Monopolistically competitive firms advertise to misinform consumers.

Answer 1

Answer:

B) Signaling theory suggests that expensive testimonials from celebrities indicate a higher quality product.

Explanation:

In advertisement, signalling theory uses a biological approach that celebrities, which are seen as successful, wealthy, powerful, etc. transmit a sense of quality to the products that they endorse or recommend.

For example, Mr. T's breakfast cereal was very successful during the 1980s because customers identified Mr. T with being strong, healthy and powerful. Most people are usually followers, not leaders, and we like to follow our famous celebrities.