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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364

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Principles of Economics 2e

2nd Edition
Steven A. Greenlaw; David Shapiro
ISBN: 9781947172364
Textbook Problem

Your company operates in a perfectly competitive market. You have been told that advertising can help you increase your sales in the short run. Would you create an aggressive advertising campaign for your product?

To determine

Whether the creation of an aggressive advertising campaign help in increasing sales in a perfectly competitive market.

Explanation

The company operates under the perfect competitive market and advertising helps to accelerate the sales in the short run. All the firms in the market produce the same product. So, involving into advertisement would not only increase the costs of production but also increase the sales of the rival firm.

There will be no benefit by involving into the advertisement as the same product is available in the whole market. It is not a good idea to create an aggressive advertising campaign...

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