Find all School-related info fast with the new School-Specific MBA Forum

It is currently 11 Jul 2014, 09:08

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

According to economic signaling theory, consumers may

  Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
TAGS:
Expert Post
2 KUDOS received
Current Student
User avatar
Status: Making every effort to create original content for you!!
Joined: 23 Dec 2010
Posts: 490
Location: United States
Concentration: Healthcare, Social Entrepreneurship
GMAT 1: 660 Q48 V34
GMAT 2: 750 Q49 V42
Followers: 238

Kudos [?]: 789 [2] , given: 82

According to economic signaling theory, consumers may [#permalink] New post 28 Mar 2013, 02:54
2
This post received
KUDOS
Expert's post
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.
1) 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
[Reveal] Spoiler: OA
E


2) 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
[Reveal] Spoiler: OA
C


3) 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.
[Reveal] Spoiler: OA
B


4) 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.
[Reveal] Spoiler: OA
A


5) 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.
[Reveal] Spoiler: OA
D


_________________

Press Kudos if you want to say thanks

Ultimate Reading Comprehension Encyclopedia | Ultimate Sentence Correction Encyclopedia | GMAT Prep Software Analysis and What If Scenarios -- VERBAL | GMAT Prep Software Analysis and What If Scenarios -- IR

Please Read and Follow the 9 Rules of Posting in Verbal Forum

Intern
Intern
avatar
Joined: 16 Oct 2012
Posts: 33
Location: India
Concentration: Operations, Healthcare
GMAT Date: 05-24-2013
GPA: 3.77
WE: Engineering (Computer Software)
Followers: 0

Kudos [?]: 7 [0], given: 21

Re: According to economic signaling theory, consumers may [#permalink] New post 28 Mar 2013, 11:42
I got EABAD.. , got the second question wrong,can anyone explain?
_________________

All Gmatclub Forum tags at one place
viewforumtags.php

2 KUDOS received
Senior Manager
Senior Manager
User avatar
Status: Final Lap
Joined: 25 Oct 2012
Posts: 290
Concentration: General Management, Entrepreneurship
Schools: Oxford
GPA: 3.54
WE: Project Management (Retail Banking)
Followers: 2

Kudos [?]: 82 [2] , given: 85

Re: According to economic signaling theory, consumers may [#permalink] New post 01 Apr 2013, 06:11
2
This post received
KUDOS
Hi samvit

2) The primary purpose of the passage is to

A) present findings that contradict one explanation for the effects of a particular advertising practice
Wrong: The passage is not dealing with a particular advertising practice BUT with severel ones ( i.e advertising heavily , use of color ...)

B) argue that theoretical explanations about the effects of a particular advertising practice are of limited value without empirical evidence
Wrong: same issue as A

C) discuss how and why particular advertising practices may affect consumers' perceptions
Correct:
First paragraph: 1st particular advertising practice: advertising heavily
How: 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.
Why: Because large advertising expenditures represent a significant .....

Second paragraph: Another particular advertising practice: printed advertisements
How: use of color affected consumer perception of brand quality.
Why: Because consumers recognize that color advertisements are more expensive ....

D) contrast the research methods used in two different studies of a particular advertising practice
Wrong: same issue as A and B

E) explain why a finding about consumer responses to a particular advertising practice was unexpected
Wrong: same issue

Always read the questions carefully ....

Hope that helps
:)
_________________

KUDOS is the good manner to help the entire community.

"If you don't change your life, your life will change you"

Re: According to economic signaling theory, consumers may   [#permalink] 01 Apr 2013, 06:11
    Similar topics Author Replies Last post
Similar
Topics:
4 Experts publish their posts in the topic According to a recent study of consumer spending on eybrj2 9 12 May 2012, 16:04
2 According to a recent study of consumer spending on licampus 8 04 Sep 2010, 04:19
According to most evolutionary theories, a GHIBI 3 14 Jan 2008, 22:42
According to a recent study of consumer spending on KC 2 23 Oct 2006, 12:56
Mainstream economic theory holds that manufacturers, in WinWinMBA 6 16 Jun 2005, 15:50
Display posts from previous: Sort by

According to economic signaling theory, consumers may

  Question banks Downloads My Bookmarks Reviews Important topics  


GMAT Club MBA Forum Home| About| Privacy Policy| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group and phpBB SEO

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.