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OG According to economic signaling theory

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AbeNeedsAnswers Master | Next Rank: 500 Posts Default Avatar
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OG According to economic signaling theory

Post Thu Jul 27, 2017 7:29 pm
According to economic signaling theory, consumers may perceive the frequency with which an unfamiliar brand is advertised as a cue that the brand is of high quality. The notion that highly advertised brands are associated with high-quality products does have some empirical support. Marquardt and McGann found that heavily advertised products did indeed rank high on certain measures of product quality. Because large advertising expenditures represent a significant investment on the part of a manufacturer, only companies that expect to recoup these costs in the long run, through consumers' repeat purchases of the product, can afford to spend such amounts.

However, two studies by Kirmani have found that although consumers initially perceive expensive advertising as a signal of high brand quality, at some level of spending the manufacturer's advertising effort may be perceived as unreasonably high, implying low manufacturer confidence in product quality. If consumers perceive excessive advertising effort as a sign of a manufacturer's desperation, the result may be less favorable brand perceptions. In addition, a third study by Kirmani, of print advertisements, found that the use of color affected consumer perception of brand quality. Because consumers recognize that color advertisements are more expensive than black and white, the point at which repetition of an advertisement is perceived as excessive comes sooner for a color advertisement than for a black-and-white advertisement.

49) Which of the following best describes the purpose of the highlight sentence?
A) To Show that economic signaling theory fails to explain a finding
B) To introduce a distinction not accounted for by economic signaling theory
C) To account for an exception to a generalization suggested by Marquardt and McGann
D) To explain why Marquardt and McGann's research was conducted
E) To offer an explanation for an observation reported by Marquardt and McGann

50) The primary purpose of the passage is to
A) present findings that contradict one explanation for the effects of a particular advertising practice
B) argue that theoretical explanations about the effects of a particular advertising practice are of limited value without empirical evidence
C) discuss how and why particular advertising practices may affect consumers' perceptions
D) contrast the research methods used in two different studies of a particular advertising practice
E) explain why a finding about consumer responses to a particular advertising practice was unexpected

51) Kirmani's research, as described in the passage, suggests which of the following regarding consumers' expectations about the quality of advertised products?
A) Those expectations are likely to be highest if a manufacturer runs both black-and-white and color advertisements for the same product.
B) Those expectations can be shaped by the presence of color in an advertisement as well as by the frequency with which an advertisement appears.
C) Those expectations are usually high for frequently advertised new brands but not for frequently advertised familiar brands.
D) Those expectations are likely to be higher for products whose black-and-white advertisements are often repeated than for those whose color advertisements are less often repeated.
E) Those expectations are less definitively shaped by the manufacturer's advertisements than by information that consumers gather from other sources.

52) Kirmani's third study, as described in the passage, suggests which of the following conclusions about a black-and-white advertisement?
A) It can be repeated more frequently than a comparable color advertisement could before consumers begin to suspect low manufacturer confidence in the quality of the advertised product.
B) It will have the greatest impact on consumers' perceptions of the quality of the advertised product if it appears during periods when a color version of the same advertisement is also being used.
C) It will attract more attention from readers of the print publication in which it appears if it is used only a few times.
D) It may be perceived by some consumers as more expensive than a comparable color advertisement.
E) It is likely to be perceived by consumers as a sign of higher manufacturer confidence in the quality of the advertised product than a comparable color advertisement would be.

53) The passage suggests that Kirmani would be most likely to agree with which of the following statements about consumers' perceptions of the relationship between the frequency with which a product is advertised and the product's quality?
A) Consumers' perceptions about the frequency with which an advertisement appears are their primary consideration when evaluating an advertisement's claims about product quality.
B Because most consumers do not notice the frequency of advertisement, it has little impact on most consumers' expectations regarding product quality.
C) Consumers perceive frequency of advertisement as a signal about product quality only when the advertisement is for a product that is newly on the market.
D) The frequency of advertisement is not always perceived by consumers to indicate that manufacturers are highly confident about their products' quality.
E) Consumers who try a new product that has been frequently advertised are likely to perceive the advertisement's frequency as having been an accurate indicator of the product's quality.

Q49: E
Q50: C
Q51: B
Q52: A
Q53: D

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Post Fri Aug 04, 2017 6:28 am
Quote:
53) The passage suggests that Kirmani would be most likely to agree with which of the following statements about consumers' perceptions of the relationship between the frequency with which a product is advertised and the product's quality?
A) Consumers' perceptions about the frequency with which an advertisement appears are their primary consideration when evaluating an advertisement's claims about product quality.
B Because most consumers do not notice the frequency of advertisement, it has little impact on most consumers' expectations regarding product quality.
C) Consumers perceive frequency of advertisement as a signal about product quality only when the advertisement is for a product that is newly on the market.
D) The frequency of advertisement is not always perceived by consumers to indicate that manufacturers are highly confident about their products' quality.
E) Consumers who try a new product that has been frequently advertised are likely to perceive the advertisement's frequency as having been an accurate indicator of the product's quality.
Signaling Theory: frequency of ads and product's quality are positively correlated
Kirmani's finding: Beyond a certain threshold, consumers find ads to be excessive and thus think less of a product's quality. The answer is D

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Post Fri Aug 04, 2017 6:26 am
Quote:
52) Kirmani's third study, as described in the passage, suggests which of the following conclusions about a black-and-white advertisement?
A) It can be repeated more frequently than a comparable color advertisement could before consumers begin to suspect low manufacturer confidence in the quality of the advertised product.
B) It will have the greatest impact on consumers' perceptions of the quality of the advertised product if it appears during periods when a color version of the same advertisement is also being used.
C) It will attract more attention from readers of the print publication in which it appears if it is used only a few times.
D) It may be perceived by some consumers as more expensive than a comparable color advertisement.
E) It is likely to be perceived by consumers as a sign of higher manufacturer confidence in the quality of the advertised product than a comparable color advertisement would be.
The last line of the passage informs us that because color ads are more expensive, the point at which color ads seem to be excessive comes sooner than it does for black and white ads. The answer is A

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Post Fri Aug 04, 2017 6:24 am
Quote:
51) Kirmani's research, as described in the passage, suggests which of the following regarding consumers' expectations about the quality of advertised products?
A) Those expectations are likely to be highest if a manufacturer runs both black-and-white and color advertisements for the same product.
B) Those expectations can be shaped by the presence of color in an advertisement as well as by the frequency with which an advertisement appears.
C) Those expectations are usually high for frequently advertised new brands but not for frequently advertised familiar brands.
D) Those expectations are likely to be higher for products whose black-and-white advertisements are often repeated than for those whose color advertisements are less often repeated.
E) Those expectations are less definitively shaped by the manufacturer's advertisements than by information that consumers gather from other sources.
Kirmani discovered that beyond a critical threshold, additional advertising seems to hurt perceptions of a product's quality. Kirmani also noted that this threshold seemed lower for color advertisements than print advertisements. So color and frequency both play a role in product perceptions. The answer is B

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GMAT/MBA Expert

Post Fri Aug 04, 2017 6:22 am
Quote:
50) The primary purpose of the passage is to
A) present findings that contradict one explanation for the effects of a particular advertising practice
B) argue that theoretical explanations about the effects of a particular advertising practice are of limited value without empirical evidence
C) discuss how and why particular advertising practices may affect consumers' perceptions
D) contrast the research methods used in two different studies of a particular advertising practice
E) explain why a finding about consumer responses to a particular advertising practice was unexpected
This passage details a host of different advertising practices: frequent vs infrequent advertisements; color vs black and white advertisements with respect to frequency, etc. We then receive explanations for how consumers respond in each of these scenarios. Captured in C

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GMAT/MBA Expert

Post Fri Aug 04, 2017 6:15 am
Quote:
49) Which of the following best describes the purpose of the highlight sentence?
A) To Show that economic signaling theory fails to explain a finding
B) To introduce a distinction not accounted for by economic signaling theory
C) To account for an exception to a generalization suggested by Marquardt and McGann
D) To explain why Marquardt and McGann's research was conducted
E) To offer an explanation for an observation reported by Marquardt and McGann
Marquardt and McGann observed that there was a correlation between the frequency of advertisements for a product and that product's quality. The highlighted sentence explains why this correlation exists - because high levels of investment in a product suggests confidence in the product's quality. The answer is E

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