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Homework answers / question archive / Should a monopoly advertise in an effort to increase its sales and its profits? Why or why not?

Should a monopoly advertise in an effort to increase its sales and its profits? Why or why not?

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Should a monopoly advertise in an effort to increase its sales and its profits? Why or why not?

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A monopoly should not advertise to increase its sales and profits. This is because products produced by monopoly have no substitute hence the firm has all the market to itself. This firm has the power to set prices; therefore, it can deliver limited goods and charge highly to maximize profits. It can also lower its costs to increase sales and clear old stocks. The power of a monopoly firm makes advertising unnecessary unless in situations where the firm wants to create awareness in the market on product changes or warn against the side effect of the products.

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