Question

As customers come to believe that a firm's product is unique, this allows the firm to

a. decrease its advertising expenditures.
b. customize its product.
c. force other companies out of the market by lowering prices.
d. obtain loyal customers.

Answer 1

Advertising plays a crucial role in differentiating a firm's products, allowing them to obtain loyal customers.

Step-by-step explanation:

In the framework of monopolistic competition, advertising plays a crucial role in differentiating a firm's products from its competitors. When customers believe that a firm's product is unique, it allows the firm to obtain loyal customers. This is because the perceived uniqueness of the product creates a sense of value and differentiation in the minds of customers, leading to increased customer loyalty.