Question

Which of the following statements explains why the cost of advertising might be relevant to a consumer’s decision about which brand of a product to purchase? Cheap or limited advertising signals that the producer feel so confident about their product that no advertisement is really needed. Costly advertising sends a credible signal of product quality. Costly advertising usually provides a nicer and more exclusive presentation of a product. It is needed for consumers when they make the cost-benefit analysis about the product.

Answer 1

Correct option is (2).

Advertising is a signal to consumers about product quality. Most consumers judge product quality by cost of its advertising. So the more expensive the advertising, the higher quality is perceived about the product.