Advertising tend to increase and raise prices to consumers

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You are watching a sporting event on television. An advertisement featuring, say, Tiger Woods (a famous golfer) is broadcast during a commercial break. In the ad, Tiger Woods does nothing but hit golf balls. He never speaks. There is no written copy. At the end of the advertisement, the Nike "swoosh" appears on the screen along with the words "Nike Golf." A short time earlier, you read in a newspaper that Tiger Woods received, say, $40 million to be the spokesman for Nike golf equipment. A friend watches the Nike advertisement with you and says "What a waste of society's resources. I didn't learn anything about Nike golf equipment from that ad. I think there should be government regulations requiring ads to be informative in some 'way.' " Explain to your friend what you did learn from Tiger Woods' presence in this ad. Did the use of the Nike name and the Nike "swoosh" provide any information? Explain. And does advertising tend to increase and raise prices to consumers or increase competition and reduce prices to consumers? Why?

Reference no: EM133319965

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