Advertising can impede economic efficiency when it:

• A. increases competition among sellers
• B. provides consumers with accurate product information
• C. creates barriers to entry for new firms
• D. lowers the cost of production for firms

Answer: (C)

Verified step by step guidance

1. Understand the concept of economic efficiency, which occurs when resources are allocated in a way that maximizes total surplus (the sum of consumer and producer surplus) without waste.
2. Recognize that advertising can have different effects: it can increase competition, provide information, create barriers to entry, or affect production costs.
3. Analyze how each option affects economic efficiency: increasing competition and providing accurate information generally improve efficiency by helping consumers make better choices and encouraging firms to compete on quality and price.
4. Focus on the option 'creates barriers to entry for new firms' — barriers to entry limit competition by preventing new firms from entering the market, which can lead to higher prices and less innovation, thus reducing economic efficiency.
5. Conclude that advertising impedes economic efficiency when it creates barriers to entry because it restricts competition and the free flow of goods and services, leading to a less efficient market outcome.