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Advertising can impede economic efficiency when it increases consumer awareness of substitute products, reduces brand loyalty, increases entry barriers, or enables firms to achieve substantial?
Advertising can impede economic efficiency when it increases consumer awareness of substitute products, reduces brand loyalty, increases entry barriers, or enables firms to achieve substantial?1) True
2) False
Advertising can serve as a barrier to entry in markets by promoting brand loyalty and requiring new entrants to spend heavily on advertising to compete, often leading to higher prices and reduced economic efficiency, hence the statement is true.In markets like monopolistically competitive ones, where there is substantial product differentiation, advertising contributes to fostering brand loyalty. This brand loyalty can be so strong that it deters new competitors, who then perceive the market as having high entry costs due to the need for heavy advertising expenditure to match established firms.Furthermore, advertising can lead to higher prices. When firms maintain barriers to entry through advertising, they may be empowered to sustain artificially high prices, which is not in line with economic efficiency. In essence, while advertising can have the potential to increase awareness and encourage competition, it can also have the opposite effect by erecting barriers to entry and enabling firms to set higher prices, thereby reducing consumer surplus and leading to a decline in overall economic surplus., hence the statement is true....