Persuasive advertising is often used when competition is:

• A. based on product differentiation
• B. limited to price wars only
• C. absent and there is a monopoly
• D. perfect and all products are identical

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the concept of persuasive advertising. Persuasive advertising aims to convince consumers that a product is unique or superior, often by emphasizing brand image, quality, or other non-price attributes.
2. Step 2: Recognize the market conditions where persuasive advertising is most effective. It is typically used when products are differentiated, meaning they are not perfect substitutes and have unique features or branding.
3. Step 3: Analyze the options given: if competition is based on price only, firms usually engage in price wars rather than persuasive advertising; if there is a monopoly, advertising is less about persuasion and more about informing or maintaining market power; if products are identical (perfect competition), advertising is generally minimal or focused on price.
4. Step 4: Conclude that persuasive advertising is most relevant when competition is based on product differentiation, as firms try to highlight differences to gain market share.
5. Step 5: Therefore, the correct understanding is that persuasive advertising is often used when competition is based on product differentiation.