A critic of advertising tells you that the costs of advertising are built into the costs for products, which are then passed on to the consumer. You have decided to argue the point with him. Which argument should you not present?
a. This must be balanced against the time it would take a person if he or she had to search for information about products without advertising.
b. Economies of scale spread fixed costs over a large number of production units
c. The increased demand for products that results from advertising can lower the cost of the production of the products.
d. This is a misconception. Often, the costs of advertising are not built into the costs for products.
Question 2
In 2000, Volkswagen spent about 551 million per year in advertising. Volkswagen sales were around 15.7 billion. Volkswagen's advertising spending as a percentage of sales was approximately 3.4 percent. General Motors spent about 3.9 billion in advertising over the same period of time. GM's sales were around 136 billion. GM's advertising spending as a percentage of sales was approximately 2.8 percent. According to the book, this information supports the argument that
a. it is difficult to identify a predictable relationship between advertising and sales.
b. the cost of advertising results in higher prices for consumers.
c. advertising does not stimulate competition.
d. advertising does not ultimately benefit the economy as a whole.
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