Question

5. The role of brand names and advertising. Which of the following statements about expenditures on advertising is true?

A. When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality.
B. When a firm spends a small amount of money on advertising, this signals that the quality of the good is high.
C. If a firm knows its product is of low quality, it will be willing to spend large amounts of money on advertising.

Answer 1

A. When a firm spends a large amount of money on advertising, advertising can be construed as a signal of quality.

Step-by-step explanation:

When a firm spends a large amount of money in advertising its product, it means that the company is confident about its product and is willing to spend a lot because they know their product would be a success

I hope my answer helps you