Chapter 68, Problem 4MCQ

To determine

To state: the purpose of brand names

Answer to Problem 4MCQ

The correct answer is option E.

Explanation of Solution

Brand names are usually used by the firms to highlight them and their products and their uses and differentiate them from those of the other firms. A successful brand name in a market means that there are loyal consumers for that brand. Loyal customer of a particular brand will always prefer their brand over another brand.

So, the brand name is a signal of its quality.

A successful brand name in a market means that there are loyal consumers for that brand. This loyalty would act as the barrier to entry for new firms. In a market where brand names and product differentiation are used to determine the market power, any new firm would find it very difficult to enter the market and would have to spend a huge amount to establish their business and name in the market.

So, the Correct answer is E.

Economics Concept Introduction

Introduction:

Brand name: is defined as a name that helps to identify a specific company, product, or service and differentiates it from similar brands within the same category.