Which of the following statements about brand names is true?
1. Brand names give the seller an incentive to provide consistently high-quality products and services in order to protect the reputation of the brand.
2. Brand names are always economically wasteful since they dupe consumers into buying more expensive goods and services that are no different from generic versions.
3. It is always rational to prefer brand names over generic substitutes.
Read the following example and determine whether it illustrates a common critique or defense of advertising.
While shopping for soda, Simone is trying to determine whether to purchase the generic cola or the brand ZCola. Although she would not notice the difference between the two in a blind taste test, she buys the higher-priced ZCola because she has seen it advertised as being ""The drink that's the life of partieZ."" This illustrates a common____________ of advertising.

1. Brand names give the seller an incentive to provide consistently high-quality products and services in order to protect the reputation of the brand.

Options 2 and 3 are wrong:

2. Brand names are always economically wasteful since they dupe consumers into buying more expensive goods and services that are no different from generic versions.

⇒ FALSE, just because a product has a certain brand it doesn't make it better and therefore more expensive. There are brands that consumers associate with luxury and expensive products, while there are other brands that consumers recognize while not necessarily being more expensive than others, e.g Coke.

3. It is always rational to prefer brand names over generic substitutes.

⇒ FALSE, it depends on the type of product. Generic medicines as just as effective as banded medicines.

Read the following example and determine whether it illustrates a common critique or defense of advertising.

This illustrates a common CRITIQUE of advertising. This ad targets young people that are susceptible to believing exaggerated or materialistic aspects of a product that cannot be proven correct or wrong.