Contemporary Advertising and Integrated Marketing Communications 15th Edition by William F Arens – Test Bank

 

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Sample Test

Chapter 03

The Big Picture: Economic and Regulatory Aspects

 

True / False Questions

1.	Proponents of advertising say advertised products are unsafe because they do not put a company’s name and reputation on the line. True    False

 

2.	The moment a company begins to advertise, it sets off a chain reaction of economic events. True    False

 

3.	Advertising adds value to a brand by educating customers about new uses for a product. True    False

 

4.	Intense competition always tends to stimulate the number of businesses in an industry. True    False

 

5.	The importance of advertising is best demonstrated by the principle of communal interest. True    False

 

6.	When a bakery claims through an ad that it bakes and sells the “the best cinnamon rolls in the world”, it is using puffery. True    False

 

7.	Critics opine that advertising is so powerful that consumers are helpless to defend themselves against it. True    False

 

8.	The more commercials that hit the consumer’s brain, the less effective paid advertising is. True    False

 

9.	Avoiding negative stereotypes is the same as ignoring cultural diversity. True    False

 

10.	Proponents of advertising believe that it fosters employment and gives consumers a wider variety of product choices. True    False

 

11.	When an advertiser acts unethically or irresponsibly, he/she automatically violates the law. True    False

 

12.	Truthful commercial speech is entitled to significant, if not full, protection under the First Amendment. True    False

 

13.	In the context of advertising, children are rarely treated as sole decision makers. True    False

 

14.	CARU is a legal body that safeguards the interests of the advertising industry. True    False

 

15.	Deceptive advertising occurs when a consumer is “unjustifiably injured” or there is a “violation of public policy.” True    False

 

16.	Comparative advertising is illegal in the United States. True    False

 

17.	A consent decree is a document the advertiser signs agreeing to stop the objectionable advertising without admitting any wrongdoing. True    False

 

18.	A patent is a form of protection provided to the authors of “original works of authorship,” including literary, dramatic, musical, artistic, and certain other “intellectual works.” True    False

 

19.	The chief function of the consumer protection agencies is to protect local consumers against unfair and misleading practices by area merchants. True    False

 

20.	The Better Business Bureau’s files on violators are open to the public. True    False

 

21.	Television networks rarely review advertising. True    False

 

22.	Consumer advocate groups investigate advertising complaints received from the public and those that grow out of their own research. True    False

 

23.	Advertising agencies rely entirely on the information provided by the advertisers about their products or services and rarely verify claims made by the them. True    False

 

24.	Advertising agencies cannot be held legally liable for fraudulent or misleading advertising claims as the products or services belong to their clients. True    False

 

25.	The AAF is instrumental in influencing agencies and advertisers to abide by its Advertising Principles of American Business because most local advertising clubs belong to this federation. True    False

 

 

Multiple Choice Questions

26.	Simon Bates, a market analyst, believes that advertising sometimes causes prices of products to increase which, in turn, affect consumer demand adversely. In this instance, Bates is focusing on the _____ role of advertising. A. economic   B. societal   C. legal   D. moral   E. ethical

 

27.

The _____ framework, derived from the idea that society should promote behaviors that foster the greatest good for the most people, offers a system of free enterprise that has raised living standards better than any other economic system in history. A. elitist   B. utilitarian   C. totalitarian   D. authoritarian   E. monopolistic

 

28.	In which of the following ways does advertising add value to a brand? A. By making products functionally better   B. By eliminating sexual stereotypes   C. By making products better known   D. By benefiting generic brands the best   E. By addressing product’s quality directly

 

29.	Advertising helps keep prices down by: A. educating consumers about new uses of products.   B. conveying positive images of products.   C. lowering the cost of production.   D. encouraging competition.   E. offering people the opportunity to satisfy symbolic wants and needs.

 

30.	As a cost of doing business, advertising is paid for by the _____. A. manufacturers   B. wholesalers   C. ad agencies   D. retailers   E. consumers

 

31.

Which of the following statements is true about the effect of advertising on prices? A. In industries subject to government price regulation, advertising has historically had no effect on prices.   B. Advertising affects prices of all products regardless of price regulation by the government.   C. Advertising makes generic products costlier.   D. Advertising often contributes to rising prices as it eliminates competition.   E. Historically, advertising has had significant effect on prices of agricultural products.

 

32.	David visited the supermarket to buy soft drinks. In this instance, David’s demand for soft drinks can be classified as _____. A. selective demand   B. primary demand   C. unwholesome demand   D. latent demand   E. negative demand

 

33.	For a snack on a cold day, Teresa wants a bowl of Lin’s chicken noodle soup. Which of the following types of demand does Teresa have? A. Primary demand   B. Unwholesome demand   C. Selective demand   D. Latent demand   E. Negative demand

 

34.

In declining markets: A. advertising stimulates demand for the entire product class.   B. the only effect advertising will have on primary demand is to slow the rate of decline.   C. advertising has no influence over selective demand.   D. the only effect advertising will have on selective demand is to slow the rate of decline.   E. advertisers are largely indifferent to conquest sales.

 

35.

According to the _____, in an economy that produces more goods and services than can be consumed, advertising keeps consumers informed of their alternatives and allows companies to compete more effectively for consumer dollars. A. motivational theory   B. utilitarian framework   C. abundance principle   D. AIDA approach   E. Two-factor theory

 

36.

Which of the following functions does advertising serve in countries where consumers have more income to spend after their physical needs are satisfied? A. It stimulates the sale of products with relatively inelastic demand.   B. It helps achieve long-term acceptance for products that do not meet consumer approval.   C. It discourages the entry and use of new products in the market.   D. It stimulates innovation and new products.   E. It discourages competition.

 

37.

Which of the following best supports the statement: “Advertising stimulates a healthy economy”? A. Today’s consumers are no more concerned about prices than before.   B. In contemporary times, the demand for luxury goods far exceeds the supply.   C. Today’s consumers are no less concerned about reducing social costs than before.   D. The supply of goods with relatively inelastic demand has remained constant over the years.   E. Consumers are now more informed and in a position to insist that manufacturers be held accountable for their advertising.

 

38.	Criticisms that focus on the style of advertising, saying it’s deceptive or crafty, are referred to as _____. A. short-term manipulative arguments   B. testimonials   C. long-term macro arguments   D. consent decrees   E. patents

 

39.	_____ refers to exaggerated, subjective claims that can’t be proven true or false. A. Covert advertising   B. Puffery   C. Brand value   D. Bait-and-switch   E. Stereotyping

 

40.	When the city of Pensacola in Florida uses the slogan, “the best seafront vacation in the Americas” to promote tourism in the area, it is using _____. A. covert advertising   B. demarketing   C. puffery   D. bait-and-switch   E. a stereotype

 

41.	A company that manufactured ladders advertised its products as “the strongest, safest, and the most durable ladders in the world.” This is an instance of _____. A. nonproduct advertising   B. covert advertising   C. bait-and-switch   D. puffery   E. stereotyping

 

42.	Which of the following is a feature of puffery? A. Objective claims   B. Genuineness   C. Validity   D. Fairness   E. Exaggeration

 

43.

Which of the following statements about deceptive advertising is true? A. Deceptive advertising helps establish long-term consumer confidence in the product being advertised.   B. Puffery becomes deceptive when taken literally.   C. Under current advertising law, puffery includes product claims that are factually false.   D. Puffery in advertisement enhances brand value.   E. Nonproduct facts are rarely used in deceptive advertising.

 

44.	Under current law, the only product claims that are considered deceptive are those that: A. are factually false.   B. do not provide complete information.   C. violate public policy.   D. cannot be substantiated.   E. are both exaggerated as well as subjective.

 

45.	An ad for a soft drink that uses the slogan: “Life is good” is employing _____. A. a comparative fact   B. advocacy information   C. a nonproduct fact   D. a short-term manipulative argument   E. a long-term macro argument

 

46.

According to African American Sam Perkins, the owner of Maryland’s largest ad agency, “If you were to come from another planet and watch American television, you would think that all black people did was play basketball and hang out on street corners, and do rap music.” In this instance, Perkins is accusing advertising of: A. promoting materialism.   B. promoting puffery.   C. manipulating people into buying things they don’t need.   D. perpetuating stereotypes.   E. violating public policy.

 

47.

Historically, the British have been known to use the derogatory term “frogs” to refer to the French. When a London-based language institute advertised its French language course from elementary to advanced levels, it pictured the development of a frog in stages from an egg through a tadpole to full maturity. This would be an example of _____. A. puffery   B. demarketing   C. bait-and-switch   D. cognitive bias   E. stereotype perpetuation

 

48.

An ad for a beauty product claimed that its skin-whitening properties could “cure the blackness of the darkest Africans.” Watchdog groups are most likely to accuse such an ad of _____. A. perpetuating of a stereotype   B. promoting materialism   C. engaging in demarketing   D. encouraging consumers to buy a poor quality product   E. providing incomplete information about a product

 

49.

Which of the following is an instance of stereotyping in advertising? A. The depiction of cigarette as a product with high social costs   B. The depiction of women as homemakers   C. The depiction of women as multitasking professionals   D. The depiction of aged people as versatile, energetic, and enthusiastic   E. The depiction of men as caregivers

 

50.

Being ethical refers to: A. making exaggerated, subjective claims that can’t be proven true or false.   B. doing what society views as best for a specific community of people.   C. doing what is morally right in a given situation.   D. claiming superiority to competitors in some aspect.   E. doing what is mandated by the law.

 

51.	_____ refers to doing what society views as best for the welfare of people in general or for a specific community of people. A. Puffery   B. Substantiation   C. Moral obligation   D. Social responsibility   E. Social justice

 

52.

Recently, an automobile company manufacturing racing cars and a reputed fashion house teamed up to design and market sports blazers. Ten dollars from the sale of each blazer was donated to a cancer foundation. By contributing to the foundation, the automobile company is: A. engaging in product diversification.   B. initiating a product development strategy.   C. perpetuating a materialistic viewpoint.   D. boosting selective demand.   E. behaving in a socially responsible fashion.

 

53.

A socially responsible company is most likely to: A. act in the interest of the community.   B. view puffery as a persuasive and sustainable means of attracting buyers.   C. view deceptive advertising as a necessary measure to enhance revenues.   D. consciously engage in stereotyping demographic groups in the community.   E. discount social media as an effective means of communicating with the public.

 

54.	Which of the following comprise the first level of ethical responsibility? A. Individual level   B. Societal level   C. Level of personal integrity   D. Economic level   E. Level of singular ethical concepts

 

55.	Which of the following refers to the last level of ethical responsibility? A. The group   B. The individual   C. Ethic definition   D. The society   E. Legal obligation

 

56.	Who among the following is/are responsible for executing laws passed by Congress on the national level? A. The mayor   B. The governor   C. Attorneys general   D. Federal commissions   E. The police chief

 

57.

Which of the following is included in the Central Hudson test? A. The regulation of commercial speech is illegal.   B. The government must convincingly demonstrate that there are various alternatives to accomplish the same end without restricting free speech.   C. The government is not obliged to establish that the cessation of commercial speech would be effective in furthering the government’s interest.   D. The ad in question may contain misleading claims as long as these are not numerous.   E. The government must prove that the absence of regulation would result in undesired outcomes.

 

58.

Limitation of freedom of commercial speech threatens every legal business in America primarily because any limitation on the freedom to advertise: A. automatically provides huge, monopolistic advantage to the category leaders.   B. increases economic inequities among consumers.   C. fuels price wars.   D. hinders the dissemination of complete information.   E. leads to deceptive advertising.

 

59.

The basic activity of the _____ is the review and evaluation of child-directed advertising in all media. A. Children’s Rights Council   B. Children’s Advertising Review Unit   C. Council of Ethical Advertising for Children   D. Children’s Advertising and Short Film Board   E. Children’s Media Regulatory Council

 

60.

The FTC defines _____ as any ad that contains a misrepresentation, omission, or other practice that can mislead a significant number of reasonable consumers to their detriment. A. action advertising   B. nonproduct advertising   C. deceptive advertising   D. unfair advertising   E. subversive advertising

 

61.

An in-flight magazine ran ads promoting exotic Russian caviar at significantly lower prices than usual. Later, FTC investigators determined that the caviar was not only produced locally in the U.S. but was also overpriced. In this instance, the advertisers of the caviar had engaged in _____. A. demarketing   B. puffery   C. covert advertising   D. deceptive advertising   E. product diversification

 

62.

Green Life, a supermarket based in Louisiana, recently came under scrutiny when it distributed leaflets that explicitly discouraged consumers from shopping at Appleton Supermarket, Green Life’s rival. In the leaflet, Green Life provided a comparative price chart that compared the prices of similar merchandise available at both the supermarkets. The price chart promoted the view that Green Life provided far better value for consumer dollars than did Appleton. Appleton alleged that Green Life’s claims were not only misleading but also instrumental in jeopardizing its sales. In this instance, Green Life had engaged in _____. A. demarketing   B. puffery   C. covert advertising   D. product development   E. deceptive advertising

 

63.

Some years ago, a discount store advertised that it was selling a pair of diamond earrings whose price had been reduced from the regular price of $1,199 to a discounted price of $399. Upon investigation, it was discovered that there was no evidence that the store had ever sold the earrings at the mentioned “regular” price. Which of the following types of advertising is this an example of? A. Deceptive advertising   B. Corrective advertising   C. Nonproduct advertising   D. Covert advertising   E. Comparative advertising

 

64.	_____ occurs when a consumer is “unjustifiably injured” or there is a “violation of public policy.” A. Deceptive advertising   B. Unfair advertising   C. Comparative advertising   D. Covert advertising   E. Nonproduct advertising

 

65.

If an ad is deceptive, it is most likely to: A. contain exaggerated claims that cannot be verified and are unlikely to mislead reasonable customers.   B. contain misrepresentation or omission of facts.   C. solely consist of claims made without prior substantiation.   D. cause unavoidable injuries to consumers.   E. contain objective comparisons of competing products.

 

66.

Redwagon, an automobile manufacturer, was charged for its failure to warn elderly customers about safety problems in one of its models, the Red Auto. Elderly users of the Red Auto were substantially inconvenienced owing to the lack of information pertaining to the safety problem in their cars. In this case, the FTC found that Redwagon had failed to address this safety issue in their ads for the Red Auto. This is an example of _____. A. corrective advertising   B. comparative advertising   C. unfair advertising   D. covert advertising   E. deceptive advertising

 

67.

MedPro, an American drug manufacturer, claimed in an ad that its new drug for reducing cholesterol in adults is better than other similar drugs currently available in the market. According to the claims made by MedPro, the new drug significantly reduced the chance of heart disease, a dreaded side effect of some cholesterol-reducing drugs. Furthermore, laboratory tests helped substantiate MedPro’s claim that the new drug substantially reduced the risk of heart disease in patients with high cholesterol. This is an example of _____. A. deceptive advertising   B. corrective advertising   C. puffery   D. demarketing   E. comparative advertising

 

68.	If a suspected violator cites survey findings or scientific studies, the FTC is likely to ask for _____. A. substantiation   B. endorsements   C. testimonials   D. affirmative disclosures   E. consent decree

 

69.

When Melissa looked at the container of weed and grass killer on a store shelf, she noticed a label on the container that read, “Avoid contact with eyes. This product can cause eye irritation.” This is an example of _____. A. puffery   B. a testimonial   C. noise   D. a consent decree   E. an affirmative disclosure

 

70.

The label on a carton of ice cream in a local retail shop read, “Attention Diabetics: Contains carbohydrates naturally occurring in milk, does not contain sucrose”. This is an example of _____ and would be important to people who are concerned about maintaining the right blood sugar levels. A. an affirmative disclosure   B. a testimonial of goodness   C. puffery   D. noise   E. a questionable endorsement

 

71.	A(n) _____ refers to a document the advertiser signs agreeing to stop the objectionable advertising without admitting any wrongdoing. A. trademark   B. consent decree   C. testimonial   D. customer feedback form   E. estate clearance decree

 

72.

Which of the following courses of action is the FTC most likely to take if the advertiser refuses to sign a consent decree? A. Ask for substantiation   B. Issue a cease-and-desist order   C. Scrutinize testimonials   D. Impose a non-compete clause on the advertiser   E. Ask for affirmative disclosure for product deficiencies

 

73.

A cease-and-desist order: A. is issued in the interest of advertisers and prevents the government from regulating free speech unfairly.   B. is issued to slow the demand for goods with high social costs.   C. is issued to prohibit further use of deceptive or unfair advertisements.   D. is issued after advertisers sign consent decrees.   E. is a statutory order limiting the operations of advertisers in foreign countries.

 

74.

A complaint was filed with the FTC against a flower company for false and misleading advertising. The flower company claims that it ships its inventory “directly from the fields.” The ads categorically mentioned that the flowers were not picked until they were ordered. In reality, however, the flower company stored flowers in refrigerated warehouses and shipped these to the customers once an order was placed. The FTC has ordered the flower company to _____ in order to explain and rectify the offending ads. A. sign a consent decree   B. run a covert advertisement   C. run a corrective advertisement   D. honor a cease-desist order   E. engage in demarketing

 

75.

Which of the following statements about the Food and Drug Administration (FDA) is true? A. The FDA has authority over the labeling, packaging, and branding of all packaged foods and therapeutic devices.   B. The FDA regulates the prices of food products.   C. The FDA requires health food manufacturers to list only the basic ingredients of their products on package labels.   D. The FDA regulates health insurance.   E. The FDA is not authorized to regulate the content of pharmaceutical ads.

 

76.

The Nutritional Labeling and Education Act (NLEA), which went into effect in 1994, gave the FDA additional muscle by: A. prohibiting puffery in advertisement.   B. allowing pharmaceutical companies to advertise their drugs on broadcast media as long as they mentioned any important possible side effects.   C. setting stringent legal definitions for terms such as fresh, light, low fat, and reduced calories.   D. influencing positive personal qualities and behaviors in children.   E. reviewing and evaluating child-directed advertising in all media.

 

77.

The _____ is responsible for protecting the public interest and encouraging competition. Its control over broadcast advertising is actually indirect, stemming from its authority to license broadcasters or revoke their licenses. A. Federal Trade Commission   B. National Advertising Review Council   C. Better Business Bureau   D. Federal Communications Commission   E. Inter-American Telecommunication Commission

 

78.	Through the issuance of _____, the government provides incentives to invent, invest in, and disclose new technology worldwide. A. trademarks   B. copyrights   C. patents   D. trade licenses   E. consent decrees

 

79.

Which of the following is true of a trademark? A. It grants exclusive right to print, publish, or reproduce a protected ad for the life of the trademark.   B. It is a form of protection provided to the authors of “original works of authorship.”   C. It is used to protect scientific inventions against infringement.   D. It is issued by the government to provide incentives to invent, invest in, and disclose new technology worldwide.   E. It is used by a manufacturer to identify his goods and distinguish them from those manufactured or sold by others.

 

80.	The _____ protects all copyrighted material, including advertising, in the United States. A. Better Business Bureau   B. Library of Congress   C. Federal Trade Commission   D. Federal Department of Commerce   E. U.S. Patent Office

 

81.	Which of the following can be copyrighted? A. An original idea   B. A slogan   C. A familiar symbol   D. A design   E. A dramatic work of original authorship

 

82.	State legislation governing advertising is often based on the _____ statute developed in 1911 by Printer’s Ink. A. dual factor model   B. self-regulatory model   C. truth-in-advertising model   D. need hierarchy model   E. ethical decision making model

 

83.

A supermarket in Ashland County, Wisconsin, was charged for running a series of ads in the local newspapers creating a false sense of urgency among consumers about sales that never actually came to an end. This is an example of _____. A. a continuous sale   B. puffery   C. a classified ad   D. a covert ad   E. direct selling

 

84.

The primary purpose of the National Advertising Review Council is to: A. convince critics about the benefits of advertising.   B. replace the Federal Trade Commission as the chief advertising regulatory agency.   C. work with the Department of Justice to prevent any one company from monopolizing a particular media.   D. protect all copyrighted material, including advertising, in the United States.   E. promote and enforce standards of truth, accuracy, taste, morality, and social responsibility in advertising.

 

85.

The National Advertising Division (NAD) of the National Advertising Review Council (NARC): A. regulates the prices of consumer goods.   B. serves as the appeals board for decisions made by the National Advertising Review Board.   C. monitors advertising practices and reviews complaints about advertising.   D. is the parent organization of the Better Business Bureau.   E. sets stringent legal definitions for terms such as fresh, light, low fat, and reduced calories.

 

86.	Which of the following media conducts the strictest review? A. Television networks   B. Social networks   C. Radio   D. Newspapers   E. Magazines

 

87.

_____ investigate(s) advertising complaints received from the public and those that grow out of their own research. A. The Federal Trade Commission   B. Consumer advocate groups   C. Consumer information networks   D. The Association of National Advertisers   E. The American Association of Advertising Agencies

 

88.	_____ refers to the social action designed to dramatize the rights of the buying public. A. Socialism   B. Consumerism   C. Social responsibility   D. Materialism   E. Social justice

 

89.

Which of the following is true with regard to advertising agencies? A. They can be held legally liable for fraudulent or misleading advertising claims.   B. They can safely bypass product claims verification before using them in advertising.   C. They rarely submit ads for review as they cannot be held legally liable for false or deceptive advertising claims.   D. They never monitor their own practices.   E. They are major regulators of advertising for products sold in interstate commerce.

 

90.

The _____, an association of the largest ad agencies in the United States, controls agency practices by denying membership to any agency judged unethical. A. American Advertising Federation   B. Association of National Advertisers   C. Consumer Federation of America   D. American Association of Advertising Agencies   E. National Advertising Review Council

 

 

Short Answer Questions

91.	What reason do the proponents of advertising cite when they say advertised products are safer?

 

92.	How does advertising add value to a brand?

 

93.	How does advertising help lower prices?

 

94.	What is selective demand?

 

95.	Which organization in the United States is the major regulator of advertising for products sold in interstate commerce?

 

96.	What are the three kinds of information the FTC typically looks for from suspected violators?

 

97.	What is a trademark?

 

98.	What is a copyright? What rights does it afford an advertiser?

 

99.	Write a short note on the Better Business Bureau.

 

100.	What is the primary function of the National Advertising Review Council (NARC)?

 

 

Essay Questions

101.	What effect would advertising have on primary demand in declining markets?

 

102.	In an economy that produces more goods and services than can be consumed, what are the two important purposes served by advertising according to the abundance principle?

 

103.	Why do advertisers use comparative advertising? Discuss how the 1988 Trademark Law Revision Act affects comparative advertising.

 

104.	List the three courses of action that the FTC is most likely to take once it determines that an ad is deceptive or unfair?

 

105.	Name the two operating arms of the National Advertising Review Council (NARC) and briefly explain the function of each.

 

Chapter 03 The Big Picture: Economic and Regulatory Aspects Answer Key

True / False Questions

1.	Proponents of advertising say advertised products are unsafe because they do not put a company’s name and reputation on the line. FALSE Proponents of advertising say advertised products are safer because a company tries harder to fulfill its promises when its name and reputation are on the line.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Social Criticisms of Advertising

 

2.	The moment a company begins to advertise, it sets off a chain reaction of economic events. TRUE The moment a company begins to advertise, it sets off a chain reaction of economic events.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

3.	Advertising adds value to a brand by educating customers about new uses for a product. TRUE Advertising adds value to a brand by educating customers about new uses for a product.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

4.	Intense competition always tends to stimulate the number of businesses in an industry. FALSE Intense competition can reduce the number of businesses in an industry.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

5.	The importance of advertising is best demonstrated by the principle of communal interest. FALSE To the economy as a whole, the importance of advertising may best be demonstrated by the abundance principle.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

6.	When a bakery claims through an ad that it bakes and sells the “the best cinnamon rolls in the world”, it is using puffery. TRUE Puffery refers to exaggerated, subjective claims that can’t be proven true or false, such as “the best,” “premier,” or “the only way to fly.”

 

AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Identify and give examples of the two main types of social criticisms of advertising. Topic: Deceptive Advertising

 

7.	Critics opine that advertising is so powerful that consumers are helpless to defend themselves against it. TRUE Advertising, say its detractors, is so powerful that consumers are helpless to defend themselves against it.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Identify and give examples of the two main types of social criticisms of advertising. Topic: Social Criticisms of Advertising

 

8.

The more commercials that hit the consumer’s brain, the less effective paid advertising is. TRUE Too much advertising creates an externality not only for consumers (nuisance) but also for the advertisers themselves—the more commercials that hit the consumer’s brain, the less effective paid advertising is.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Identify and give examples of the two main types of social criticisms of advertising. Topic: Social Criticisms of Advertising

 

9.	Avoiding negative stereotypes is the same as ignoring cultural diversity. FALSE Avoiding negative stereotypes is not the same as embracing cultural diversity. Research evidence suggests that many Americans value their ethnic identities, and prefer brands that speak directly to them.

 

AACSB: Diversity Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Identify and give examples of the two main types of social criticisms of advertising. Topic: Social Aspects of Advertising and Promotion

 

10.

Proponents of advertising believe that it fosters employment and gives consumers a wider variety of product choices. TRUE Marketing professionals earnestly believe in the benefits that advertising brings to society. It fosters employment. It gives consumers and business customers a wider variety of choices.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Identify and give examples of the two main types of social criticisms of advertising. Topic: Social Aspects of Advertising and Promotion

 

11.

When an advertiser acts unethically or irresponsibly, he/she automatically violates the law. FALSE Ethics and social responsibility can be seen as the obligation of advertisers, to society, even when there is no legal obligation. An advertiser can act unethically or irresponsibly without breaking any laws.

 

AACSB: Ethics AACSB: Understanding Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-03 Explain the difference between social responsibility and ethics in advertising. Topic: Ethical Considerations in Advertising, Promotion, and IMC Campaigns

 

12.	Truthful commercial speech is entitled to significant, if not full, protection under the First Amendment. TRUE Decisions over the last two decades suggest that truthful commercial speech is also entitled to significant, if not full, protection under the First Amendment.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-05 Discuss regulatory issues that affect U.S. advertisers and commercial speech. Topic: Ethical Considerations in Advertising, Promotion, and IMC Campaigns

 

13.	In the context of advertising, children are rarely treated as sole decision makers. FALSE While most children and parents are still joint consumers, more and more children are becoming sole decision makers.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-05 Discuss regulatory issues that affect U.S. advertisers and commercial speech. Topic: Ethical Considerations in Advertising, Promotion, and IMC Campaigns

 

14.	CARU is a legal body that safeguards the interests of the advertising industry. FALSE To promote responsible children’s advertising and to respond to public concerns, the Council of Better Business Bureaus established the Children’s Advertising Review Unit (CARU).

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-05 Discuss regulatory issues that affect U.S. advertisers and commercial speech. Topic: Ethical Considerations in Advertising, Promotion, and IMC Campaigns

 

15.

Deceptive advertising occurs when a consumer is “unjustifiably injured” or there is a “violation of public policy.” FALSE The FTC defines deceptive advertising as any ad that contains a misrepresentation, omission, or other practice that can mislead a significant number of reasonable consumers to their detriment.

 

AACSB: Ethics AACSB: Understanding Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-06 Classify ways that federal agencies regulate advertising to protect both consumers and competitors. Topic: The Role of Government Agencies in the Regulation of Advertising

 

16.	Comparative advertising is illegal in the United States. FALSE Advertisers use comparative advertising to claim superiority to competitors in some aspect. In the United States, such ads are legal (and encouraged by the FTC) so long as the comparison is truthful.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-06 Classify ways that federal agencies regulate advertising to protect both consumers and competitors. Topic: The Role of Government Agencies in the Regulation of Advertising

 

17.

A consent decree is a document the advertiser signs agreeing to stop the objectionable advertising without admitting any wrongdoing. TRUE A consent decree is a document the advertiser signs agreeing to stop the objectionable advertising without admitting any wrongdoing. Before signing, the advertiser can negotiate specific directives with the FTC that will govern future advertising claims.

 

AACSB: Ethics AACSB: Understanding Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-06 Classify ways that federal agencies regulate advertising to protect both consumers and competitors. Topic: The Role of Government Agencies in the Regulation of Advertising

 

18.

A patent is a form of protection provided to the authors of “original works of authorship,” including literary, dramatic, musical, artistic, and certain other “intellectual works.” FALSE Through the issuance of patents, the government provides incentives to invent, invest in, and disclose new technology worldwide. By registering trademarks and copyrights, the government helps businesses protect their investments, promote their goods and services, and safeguard consumers against confusion and deception in the marketplace.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-06 Classify ways that federal agencies regulate advertising to protect both consumers and competitors. Topic: The Role of Government Agencies in the Regulation of Advertising

 

19.

The chief function of the consumer protection agencies is to protect local consumers against unfair and misleading practices by area merchants. TRUE Many cities and counties also have consumer protection agencies to enforce laws regulating local advertising practices. The chief function of these agencies is to protect local consumers against unfair and misleading practices by area merchants.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-08 List the ways that private organizations help reduce fraudulent and deceptive advertising. Topic: The Role of Government Agencies in the Regulation of Advertising

 

20.	The Better Business Bureau’s files on violators are open to the public. TRUE The BBB’s files on violators are open to the public. Records of violators who do not comply are sent to appropriate government agencies for further action.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-08 List the ways that private organizations help reduce fraudulent and deceptive advertising. Topic: Self-Regulation of Advertising

 

21.	Television networks rarely review advertising. FALSE Of all media, the TV networks conduct the strictest review. Advertisers must submit commercials intended for a network or affiliated station to its broadcast standards department.

 

AACSB: Ethics AACSB: Understanding Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-08 List the ways that private organizations help reduce fraudulent and deceptive advertising. Topic: Self-Regulation of Advertising

 

22.

Consumer advocate groups investigate advertising complaints received from the public and those that grow out of their own research. TRUE Consumer advocate groups investigate advertising complaints received from the public and those that grow out of their own research. If a complaint is warranted, they ask the advertiser to halt the objectionable ad or practice.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-08 List the ways that private organizations help reduce fraudulent and deceptive advertising. Topic: Rules and Regulations that Affect Promotion Activities

 

23.

Advertising agencies rely entirely on the information provided by the advertisers about their products or services and rarely verify claims made by the them. FALSE Although advertisers supply information about their products or services to their agencies, the agencies must research and verify product claims and comparative product data before using them in advertising. Agencies can be held legally liable for fraudulent or misleading advertising claims.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-08 List the ways that private organizations help reduce fraudulent and deceptive advertising. Topic: Self-Regulation of Advertising

 

24.

Advertising agencies cannot be held legally liable for fraudulent or misleading advertising claims as the products or services belong to their clients. FALSE Agencies can be held legally liable for fraudulent or misleading advertising claims. For this reason, most major advertising agencies have in-house legal counsel and regularly submit their ads for review.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-08 List the ways that private organizations help reduce fraudulent and deceptive advertising. Topic: Self-Regulation of Advertising

 

25.

The AAF is instrumental in influencing agencies and advertisers to abide by its Advertising Principles of American Business because most local advertising clubs belong to this federation. TRUE The AAF Advertising Principles of American Business, adopted in 1984, define standards for truthful and responsible advertising. Because most local advertising clubs belong to the AAF, it is instrumental in influencing agencies and advertisers to abide by these principles.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-08 List the ways that private organizations help reduce fraudulent and deceptive advertising. Topic: Self-Regulation of Advertising

 

Multiple Choice Questions

26.

Simon Bates, a market analyst, believes that advertising sometimes causes prices of products to increase which, in turn, affect consumer demand adversely. In this instance, Bates is focusing on the _____ role of advertising. A. economic   B. societal   C. legal   D. moral   E. ethical Controversies swirl around the whole field of advertising. Some focus on advertising’s economic role. For example, how does advertising affect the value of products? Does it cause higher prices? Does it promote competition or discourage it? How does advertising affect overall consumer demand? What effect does it have on consumer choice and on the overall business cycle?

 

AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Social Criticisms of Advertising

 

27.

The _____ framework, derived from the idea that society should promote behaviors that foster the greatest good for the most people, offers a system of free enterprise that has raised living standards better than any other economic system in history. A. elitist   B. utilitarian   C. totalitarian   D. authoritarian   E. monopolistic The underlying principle of free-market economics is a fundamentally utilitarian framework, derived from the idea that society should promote behaviors that foster the greatest good for the most people, offers a system of economic activity—capitalism—that has raised living standards better than any other economic system in history.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Social Criticisms of Advertising

 

28.

In which of the following ways does advertising add value to a brand? A. By making products functionally better   B. By eliminating sexual stereotypes   C. By making products better known   D. By benefiting generic brands the best   E. By addressing product’s quality directly While an ad may not address a product’s quality directly, the positive image conveyed by advertising implies quality. By simply making the product better known, advertising can make the product more desirable. In this way, advertising adds value to the brand.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

29.

Advertising helps keep prices down by: A. educating consumers about new uses of products.   B. conveying positive images of products.   C. lowering the cost of production.   D. encouraging competition.   E. offering people the opportunity to satisfy symbolic wants and needs. By encouraging competition, advertising has the effect of keeping prices down.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

30.	As a cost of doing business, advertising is paid for by the _____. A. manufacturers   B. wholesalers   C. ad agencies   D. retailers   E. consumers As a cost of doing business, advertising is paid for by the consumer.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

31.

Which of the following statements is true about the effect of advertising on prices? A. In industries subject to government price regulation, advertising has historically had no effect on prices.   B. Advertising affects prices of all products regardless of price regulation by the government.   C. Advertising makes generic products costlier.   D. Advertising often contributes to rising prices as it eliminates competition.   E. Historically, advertising has had significant effect on prices of agricultural products. In industries subject to government price regulation (agriculture, utilities), advertising has historically had no effect on prices. When the government deregulated many of these industries in an effort to restore free-market competition, advertising has affected price-usually downward, but not always.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

32.

David visited the supermarket to buy soft drinks. In this instance, David’s demand for soft drinks can be classified as _____. A. selective demand   B. primary demand   C. unwholesome demand   D. latent demand   E. negative demand Primary demand is demand for the entire product class, while selective demand is demand for a particular brand.

 

AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

33.	For a snack on a cold day, Teresa wants a bowl of Lin’s chicken noodle soup. Which of the following types of demand does Teresa have? A. Primary demand   B. Unwholesome demand   C. Selective demand   D. Latent demand   E. Negative demand Selective demand is demand for a particular brand.

 

AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

34.

In declining markets: A. advertising stimulates demand for the entire product class.   B. the only effect advertising will have on primary demand is to slow the rate of decline.   C. advertising has no influence over selective demand.   D. the only effect advertising will have on selective demand is to slow the rate of decline.   E. advertisers are largely indifferent to conquest sales. In declining markets, when the only information people want is price information, advertising can influence selective demand—demand for a particular brand. But the only effect it will have on primary demand is to slow the rate of decline. In growing markets, advertisers generally compete for shares of that growth. In mature, static, or declining markets, they compete for each other’s shares—conquest sales.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

35.

According to the _____, in an economy that produces more goods and services than can be consumed, advertising keeps consumers informed of their alternatives and allows companies to compete more effectively for consumer dollars. A. motivational theory   B. utilitarian framework   C. abundance principle   D. AIDA approach   E. Two-factor theory To the economy as a whole, the importance of advertising may best be demonstrated by the abundance principle. It states that in an economy that produces more goods and services than can be consumed, advertising serves two important purposes: It keeps consumers informed of their alternatives (complete information), and it allows companies to compete more effectively for consumer dollars (self-interest).

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

36.

Which of the following functions does advertising serve in countries where consumers have more income to spend after their physical needs are satisfied? A. It stimulates the sale of products with relatively inelastic demand.   B. It helps achieve long-term acceptance for products that do not meet consumer approval.   C. It discourages the entry and use of new products in the market.   D. It stimulates innovation and new products.   E. It discourages competition. In countries where consumers have more income to spend after their physical needs are satisfied, advertising also stimulates innovation and new products.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

37.

Which of the following best supports the statement: “Advertising stimulates a healthy economy”? A. Today’s consumers are no more concerned about prices than before.   B. In contemporary times, the demand for luxury goods far exceeds the supply.   C. Today’s consumers are no less concerned about reducing social costs than before.   D. The supply of goods with relatively inelastic demand has remained constant over the years.   E. Consumers are now more informed and in a position to insist that manufacturers be held accountable for their advertising. Advertising stimulates a healthy economy. It also helps create financially healthy consumers who are more informed, better educated, and more demanding. As a result, consumers now insist that manufacturers be held accountable for their advertising.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-01 Relate advertising activities to the workings of a free-market economy. Topic: Economic Role of Advertising

 

38.

Criticisms that focus on the style of advertising, saying it’s deceptive or crafty, are referred to as _____. A. short-term manipulative arguments   B. testimonials   C. long-term macro arguments   D. consent decrees   E. patents Many of the criticisms focus on the style of advertising, saying it’s deceptive or manipulative. Collectively we might refer to these as short-term manipulative arguments.

 

AACSB: Ethics AACSB: Understanding Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Identify and give examples of the two main types of social criticisms of advertising. Topic: Social Aspects of Advertising and Promotion

 

39.

_____ refers to exaggerated, subjective claims that can’t be proven true or false. A. Covert advertising   B. Puffery   C. Brand value   D. Bait-and-switch   E. Stereotyping Puffery refers to exaggerated, subjective claims that can’t be proven true or false, such as “the best,” “premier,” or “the only way to fly.”

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Remember Difficulty: 1 Easy Learning Objective: 03-02 Identify and give examples of the two main types of social criticisms of advertising. Topic: Deceptive Advertising

 

40.

When the city of Pensacola in Florida uses the slogan, “the best seafront vacation in the Americas” to promote tourism in the area, it is using _____. A. covert advertising   B. demarketing   C. puffery   D. bait-and-switch   E. a stereotype Puffery refers to exaggerated, subjective claims that can’t be proven true or false.

 

AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Apply Difficulty: 2 Medium Learning Objective: 03-02 Identify and give examples of the two main types of social criticisms of advertising. Topic: Deceptive Advertising

 

41.

A company that manufactured ladders advertised its products as “the strongest, safest, and the most durable ladders in the world.” This is an instance of _____. A. nonproduct advertising   B. covert advertising   C. bait-and-switch   D. puffery   E. stereotyping Puffery refers to exaggerated, subjective claims that can’t be proven true or false.

 

AACSB: Reflective Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Identify and give examples of the two main types of social criticisms of advertising. Topic: Deceptive Advertising

 

42.

Which of the following is a feature of puffery? A. Objective claims   B. Genuineness   C. Validity   D. Fairness   E. Exaggeration Puffery refers to exaggerated, subjective claims that can’t be proven true or false. Even meaningless (but legal) puffery might be taken literally and therefore become deceptive.

 

AACSB: Analytical Thinking Accessibility: Keyboard Navigation Blooms: Understand Difficulty: 2 Medium Learning Objective: 03-02 Identify and give examples of the two main types of social criticisms of advertising. Topic: Deceptive Advertising