Topic

Advertising in A ‘Perfect-Competition’ Market

Instructions

Your company operates in a perfectly competitive market. You have been told that advertising can help you increase your sales in the short run. Would you create an aggressive advertising campaign for your product?

Answer preview

A perfectly competitive market is a hypothetical market which is characterized by competition which is presented at the greatest possible level. This is a hypothetical situation which makes the assumption that such a situation would provide the best possible outcomes for the consumers and the society in general. (Marshall, 2013) The market is presumed to provide perfect information where the consumers and operators within the industry have knowledge of all the key components about goods and products within the market. Figure 1 provides a graphical indication of perfect competition.

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