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- QUESTION
Please write a discussion post about the topic provided down below. Please do not use any outside resource. Please read the instructions carefully and all the way through before you start this assignment.
Discussion: Perfect Competition and Advertising
The market for milk is considered as perfectly competitive. (1) In the milk production segment of agriculture, farms are usually small. They are especially small compared to the size of the entire market for milk. (2) Milk is a uniform and homogeneous product. It is difficult to make a distinction between the milk of one farm and another. (3) One individual farmer is unable to affect the price of milk in the entire market.
In the market for milk, have you ever seen an advertisement for individual farmers, say, Farmer Patrick's milk? We think not.
Will a perfectly competitive industry advertise? For example, if Farmer Patrick won't advertise his milk, will the milk industry advertise milk? It may. A good example is the “Got milk?”
[Note: Got Milk? (Stylized as got milk?) Is an American advertising campaign encouraging the consumption of milk]
Ever wonder why you see “Got Milk?” Ads instead of advertisements for specific farmers? Do you remember those milk mustaches?
Discuss why firms in perfectly competitive markets do not advertise individually, but sometimes advertise collectively (such as, “Got milk?”)?
Share your thoughts.
Watch the video:
https://www.youtube.com/watch?v=GcP1LEG-5RA&feature=emb_logo
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APA |
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Answer
Perfect Competition and Advertising
Firms that operate in a perfect competition market do not have any powers over products’ prices. Therefore, profit maximization requires them to sell the commodities at the current market price and there is no single business which is able to interfere with the market price of the goods or services. The effect of an individual business advertising a commodity in a perfectly competitive market on its own is illogical because it would be doing it for other firms too. A firm carrying out an advertisement in this particular market will not be maximizing profit, since it is unnecessarily pushing up marginal cost as there is no effect to the firm demand because goods are standardized. More importantly, there does not exist any firm level advantages to individual companies carrying out advertisement. In case an individual firm advertises it would be essentially benefitting every firm within the industry. This scenario makes firms in a perfect competition market to advertise collectively to create awareness, convince, and persuade consumers to buy their products. For instance, milk is a homogeneous and uniform commodity. It is impossible to distinguish between the milk of one trader in comparison to another supplier. An individual milk distributer can never influence or affect milk consumption in the market, and thus needs not advertise. Whereas at the firm levels even though advertising does not offer any benefit rather than increasing the marginal cost, conducting advertisement at the industry level play an integral role in influencing the market demand for products; which helps in sustaining the industry increasing demand. Advertising campaign, for example, “got milk” is being used to increase milk’s demand for the benefit of the entire milk industry.
References
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Appendix
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Appendix A:
Communication Plan for an Inpatient Unit to Evaluate the Impact of Transformational Leadership Style Compared to Other Leader Styles such as Bureaucratic and Laissez-Faire Leadership in Nurse Engagement, Retention, and Team Member Satisfaction Over the Course of One Year
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