Persuasive advertising is often used when competition:

• A. is perfect and all firms sell identical products
• B. is absent and there is a monopoly
• C. is based on product differentiation
• D. is based solely on price and not on product features

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the nature of different market structures. In perfect competition, firms sell identical products and advertising usually focuses on price rather than persuasion.
2. Step 2: Recognize that in a monopoly, there is only one firm, so persuasive advertising is less relevant because there is no competition.
3. Step 3: Identify that product differentiation occurs in monopolistic competition or imperfect competition, where firms sell similar but not identical products.
4. Step 4: Realize that persuasive advertising is used to highlight differences in product features, quality, or brand image to influence consumer preferences in markets with product differentiation.
5. Step 5: Conclude that persuasive advertising is most effective and commonly used when competition is based on product differentiation, rather than solely on price or in perfect competition.