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WAEC Economics 2006 Question 26

Question 26

Market Structures

Advertising expenses would not be necessary under perfect competition because

  1. A.consumers would have complete knowledge of goods
  2. B.cost of production would be at the maximum level
  3. C.every firm would enjoy the benefits of large scale production
  4. D.incomes of the consumers in the community would be high.
Show the answer and explanation

Answer: A (consumers would have complete knowledge of goods)

Explanation

Under perfect competition goods are identical and buyers have perfect knowledge, so advertising adds nothing.