Deck 2: The Economic,Social,and Regulatory Aspects of Advertising

Question 1

Uniform newspaper advertising codes make it easy for advertisers to make sure that their ads meet all legal and ethical requirements.

Answer 1

False
Explanation: One problem advertisers face is that newspapers' codes are far from uniform.Handgun ads may be prohibited by one newspaper,accepted by another if the guns are antique,and permitted by a third as long as the guns aren't automatic.

Question 2

The U.S.Supreme Court does not differentiate between speech and commercial speech.

Answer 2

False
Explanation: The Supreme Court historically distinguishes between "speech" and "commercial speech" (speech that promotes a commercial transaction).

Question 3

According to advertising supporters,it promotes a higher standard of living,subsidizes the arts and supports freedom of the press.

Answer 3

True
Explanation: Advertising,they point out,also promotes a higher standard of living;it pays for most of our news media and subsidizes the arts;it supports freedom of the press;and it provides a means to disseminate public information about important health and social issues.

Question 4

Critics argue there is too much advertising due to the proliferation of new media.

Question 5

Critics claim advertising is so powerful that consumers are helpless to defend themselves against it.

Question 6

Advertisers today do not use male and female stereotypes in their ads.

Question 7

The FTC can request a company to use corrective advertising,but it may not legally require a company to do so.

Question 8

When an ad states that chicken soup made with Swanson chicken broth "tastes as good as grandma",it is using puffery.

Question 9

Adherence to ethical and socially responsible principles is the moral obligation of advertisers.

Question 10

While most children and parents are still joint consumers,more and more children are becoming sole decision makers.

Question 11

Because there are so many federal,state and local agencies that regulate different aspects of advertising,advertisers sometimes find it difficult to comply with regulations.

Question 12

The economic effect of advertising triggers off a chain reaction of hard to predict economic events.

Question 13

Deceptive advertising occurs when a consumer is "unjustifiably injured" or there is a "violation of public policy".

Question 14

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

Question 15

The big cursive G that appears in all ads for General Mills cereals is an example of a trademark.

Question 16

The largest of the U.S.business-monitoring organizations is the Better Business Bureau.

Question 17

The importance of advertising is best demonstrated by the iceberg principle.

Question 18

Intense competition cannot reduce the number of businesses in an industry.

Question 19

When State Farm insurance uses advertising to show that it has lower rates than Progressive insurance,it is using comparative advertising.

Question 20

The chief function of the consumer protection agencies found in many cities and counties is to act as a watchdog for the federal regulators.

Question 21

Define comparative advertising and describe how the FTC controls its misuse.

Question 22

Distinguish between primary demand and selective demand?

Question 23

What are the roles and the responsibilities of the Federal Trade Commission (FTC)?

Question 24

List out the elements of Fair Information Practice Principles.

Question 25

Explain the difference between social responsibility and ethics in advertising.

Question 26

What is a trademark? Give an example of a trademark.

Question 27

What is the basis of most state legislation governing advertising?

Question 28

Define the term 'stereotypes' in advertising.

Question 29

What are the two operating arms of the National Advertising Review Council (NARC)? Briefly explain the function of each.

Question 30

What kinds of information does the Federal Trade Commission (FTC)look for in an investigation of a complaint about an advertiser?

Question 31

Distinguish between deceptive advertising and unfair advertising.

Question 32

What is ethical advertising?

Question 33

What is consumerism?

Question 34

What does the abundance principle state?

Question 35

Explain in brief the effect of advertisements on consumers and businesses.

Question 36

According to the abundance principle,what two important functions does advertising perform?

Question 37

List and explain briefly the three courses of action open to the Federal Trade Commission (FTC)once it has determined an ad is deceptive or unfair.

Question 38

Discuss in brief the role of the Nutritional Labeling and Education Act (NLEA).

Question 39

How does the Library of Congress help regulate advertising?

Question 40

What are the four parts of the Central Hudson test?

Question 41

The basic premise of _____ is that advertisers intentionally create ads with sexual messages that are hidden in the illustrations just below the limen.

A)suggestive selling
B)hidden attribution communication
C)subliminal advertising
D)periliminal communication
E)faux marketing

Question 42

Which of the following statements is true about how advertising affects competition?

A)Some observers believe that advertising actually restricts competition.
B)Advertising is not a barrier to competition.
C)Advertising is regulated so that it does not impede competition.
D)Intense advertising often encourages the entry of new brands and manufacturers into the marketplace.
E)Non-advertised products cannot compete with advertised products.

Question 43

How does advertising affect the value of a product?

A)Advertising cannot add value to a product if the advertising is needed to educate,consumers about a new product use.
B)By adding value to a product,advertising eliminates all perceptual barriers to purchase.
C)The value of advertising explains why someone would buy the more expensive Bayer aspirin rather than the store brand of aspirin that treats the same symptoms.
D)Advertising always gives added value to generic brands.
E)Advertising has no effect on the value of a brand or product.

Question 44

Maria is very upset because the writers' strike has caused her to have to live without learning what's to come with the women on Desperate Housewives and how dangerous the secret organization depicted in Heroes is.Her husband is happy as long as something mindless is on television.Maria is exhibiting _____ demand.

A)primary
B)kinked
C)secondary
D)seasoned
E)selective

Question 45

When the city of Pensacola,Florida,advertises itself as "the perfect place for the perfect Florida vacation",it is using:

A)unfair advertising.
B)advertising hyperbole.
C)deceptive advertising.
D)puffery.
E)exploitative advertising.

Question 46

Which of the following statements about the effects of advertising on the business cycle is true?

A)Historically,when business cycles dip,advertising expenditures increase.
B)The increased advertising expenditures that occur during business cycle dips always produce an increase in personal consumption expenditures.
C)When business cycles are down,advertising may act as a stabilizing force.
D)The effect of advertising on business cycles is easily determined and monitored.
E)Advertising does not affect the business cycle.

Question 47

According to the text,externalities are:

A)unseen opportunity costs.
B)social costs.
C)factors used to increase the reach of advertising.
D)environmental tangibility that act as barriers to communications.
E)inexpensive ways to increase perceptual value to a product.

Question 48

In a 1940 issue of Time magazine,the Chesapeake and Ohio train lines advertised that riding its trains would provide travelers with "the most pleasant trip they have ever known." This advertiser is using:

A)unfair advertising.
B)hyperbole.
C)deceptive advertising.
D)puffery.
E)exploitative advertising.

Question 49

Which of the following statements about the proliferation of advertising is true?

A)The proliferation of advertising is purely a consumer misperception.
B)While consumers believe there is a potential for too much advertising,advertisers do not believe it.
C)Most people tolerate ad clutter as the price they must pay for freedom of the press,free TV and a high standard of living.
D)The FCC has imposed no restraints on advertising clutter in any media.
E)The proliferation of advertising has plateaued.

Question 50

Under current law,the only product claims that are considered deceptive are those that:

A)unjustifiably injures the consumer.
B)contain inadequate information.
C)violate public policy.
D)are factually false and have the potential of misleading reasonable people.
E)produce claims without prior substantiation.

Question 51

When advertisers spend millions of dollars trying to convince people that their products will make them sexier,healthier and more successful,they are trying to:

A)manipulate consumers' value systems.
B)shorten product life cycles.
C)avoid the need to use peripheral advertising.
D)proliferate stereotypical consumers.
E)avoid the use of puffery.

Question 52

Mike and Lou are going to the mall.Mike wants to buy a pair of jeans and Lou wants to buy a pair of Levi boot-cut jeans.Mike illustrates _____ demand while Lou illustrates _____ demand.

A)secondary;kinked
B)longitudinal;circular
C)external;internal
D)primary;selective
E)selective;primary

Question 53

Which of the following statements about how advertising affects price is true?

A)Advertising has a strong effect on the price of agricultural products such as leaf tobacco,soybeans and wheat
B)Advertising always increases the price of a product-never lowers it
C)The consumer who buys the product pays for the advertising
D)Advertising has had a significant impact on the prices charged by utilities
E)The amount typically spent on advertising is large compared with total sales

Question 54

According to the text,which of the following images best describes the chain reaction of economic events that takes place once a company begins to advertise?

A)The opening break shot in billiards
B)A beautiful woman entering a room
C)A car speeding up as it goes downhill
D)Throwing darts and hitting the bull's eye
E)The knocking over of a line of dominoes

Question 55

Which of the following statements is true about deceptive advertising?

A)Puffery can be called deceptive advertising when consumers believe it to be true.
B)Deceptive advertising is sometimes used because it establishes long-term consumer confidence in the product being advertised.
C)To be labeled as deceptive,ads must contain some claims which are not prior substantiated.
D)Deceptive ads serve the best interests of the advertisers.
E)There are no regulations governing deceptive advertising.

Question 56

_____ refers to exaggerated,subjective claims that can't be proven true or false.

A)Misleading advertising
B)Hyperbole
C)Advertising manipulation
D)Exploitative advertising
E)Puffery

Question 57

The abundance principle states that in an economy that produces more goods and services than can be consumed,advertising:

A)maintains high prices.
B)keeps consumers informed of their selection alternatives.
C)contributes to the earth's waste disposal problem.
D)prevents companies from successfully competing for consumer dollars.
E)acts as a stabilizing factor during a business cycle downturn.

Question 58

What effect does advertising have on consumer demand?

A)Advertising creates trade barriers that prevent new competitors from entering the marketplace.
B)Advertising slows the rate of product decline.
C)Advertising moves the product quickly to the point in the product life cycle where it can be replaced by more efficient IMC.
D)Advertising slows the adoption process and thus,lengthens the product life cycle.
E)Advertising is intended to provide a smooth layoff to products in the latter stages of their PLC.

Question 59

According to Wilson Bryan Key,subliminal advertising:

A)works by creating a need for a previously unsought product.
B)consumers cannot be forced to perceive what cannot be seen.
C)works through embedded messages that seduce consumers into buying the good or service.
D)faux advertising is unethical.
E)results in a normative demand cycle for products.

Question 60

According to the ____,if an economy produces more goods and services than can be consumed,advertising allows companies to compete more effectively for consumer dollars and keeps consumers informed of their selection alternatives.

A)abundance principle
B)macroeconomic theory of supply and demand
C)economic principle of normalization
D)utilitarian principle of advertising
E)normative theory of supply and demand

Question 61

Nike's Air Jordan XX3,the 23^rd edition of the series of shoes endorsed by retired basketball star Michael Jordan,differs from its predecessors because it is the first basketball shoe shaped by what Nike calls "Nike Considered," an approach to design that favors environmentally-preferable materials,reduces toxic chemicals and curbs waste.By adopting such environmentally-supportive standards to make its products,Nike is:

A)manipulating the consumer.
B)behaving in a socially responsible fashion.
C)perpetuating a materialistic viewpoint.
D)complying with federal regulations.
E)initiating a market development strategy.

Question 62

Safeway,a UK supermarket chain,was reprimanded by a government agency in the United Kingdom because it distributed a leaflet titled "More reasons NOT to shop at Morrisons".(Morrisons is one of Safeway's primary competitors in the UK).In the leaflet,Safeway depicted two shopping receipts,one for Safeway and one for Morrisons.The Safeway receipt claimed goods purchased at Safeway were much cheaper than the same goods purchased at Morrisons.Morrsions said that the goods on the imaginary receipt were not typical purchases and that the reason they were cheaper on the Safeway receipt was because the goods were on sale in the Safeway store.The FTC would have said that Safeway was guilty of:

A)an ethical lapse.
B)unethical advertising.
C)deceptive advertising.
D)an ethical dilemma.
E)non-competitive advertising.

Question 63

How do advertisers show their social responsibility?

A)By refraining from the use of advertising clutter
B)By providing millions of dollars of pro bono work to nonprofit organizations
C)By obeying FTC regulations
D)By creating markets for new products
E)By creating self-regulatory agencies

Question 64

Socially responsible advertisers:

A)are always is mindful of man's need for open communication.
B)do what the government wants.
C)do what society views as best for the welfare of people in general.
D)do what ethical societies have prescribed for businesses.
E)realize there primary responsibility is to provide the greatest good for the largest number of people.

Question 65

According to the owner of NPC & Associates,Maryland's largest African-American-owned 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." He is accusing advertising of:

A)making consumers too materialistic.
B)being excessive.
C)manipulating people into buying things they don't need.
D)being deliberately deceptive.
E)perpetuating stereotypes.

Question 66

A complaint was filed with the Federal Trade Commission that accused the film industry regularly advertised R-rated movies during television shows and in magazines most popular with children.In other words,the FTC investigated to see if the film industry was guilty of:

A)hazardous advertising.
B)unfair advertising.
C)deceptive advertising.
D)an ethical dilemma.
E)anti-competitive advertising.

Question 67

The Federal Trade Commission (FTC)regulates:

A)advertising for products sold in interstate commerce.
B)hazardous packaging and advertising of products.
C)liquor advertisements,through its power to suspend,revoke or deny renewal of manufacturing and sales permits for distillers and brewers.
D)the advertising,packaging and branding of all packaged goods.
E)the placement and wording of warning statements in advertisements for toys,household products and other hazardous substances that can cause injury or death.

Question 68

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)hazardous IMC
B)faux marketing
C)unfair advertising
D)deceptive advertising
E)subversive advertising

Question 69

How has the U.S.Supreme Court intervened in the rights of advertisers under the First Amendment?

A)It has supported the ban against professional advertising.
B)It has established strict control over packaged-goods advertising.
C)It has banned all cigarette advertisements from the broadcast media.
D)It has distinguished between "speech" and "commercial speech" and offered significant protection for truthful commercial speech.
E)It has made social responsibility mandatory for publicly traded firms.

Question 70

Two companies,Le Shuttle and P&O European Ferries,provide Europeans with the ability to cross the English Channel.An advertisement for Le Shuttle claimed it was more popular with travelers than P&O European Ferries.This is an example of _____ advertising.

A)corrective
B)professional
C)comparative
D)cease-desist
E)consent

Question 71

In 2005,Adolph Coors Co.ran an ad which featured a purported taste test between Aspen Edge and Anheuser-Busch's Michelob Ultra.A taste-tester downed a glass of Aspen Edge and took only a sip of Michelob Ultra.A print version of the ad said,"Beer drinkers agree that Aspen Edge has more taste than Michelob Ultra".Coors was forced to remove the television advertisements after Anheuser-Busch said it made unsubstantiated claims about consumer preferences.Anheuser-Busch:

A)was exercising its right to protect its trademark.
B)accused Coors of violating copyright laws.
C)was using laws designed to protect protects from gray marketing.
D)wanted to see the research data that supported this claim of superior taste.
E)issued an unsupported cease-and-desist order.

Question 72

U.S.Caviar ran ads in an onboard American Airlines magazine offering real Russian caviar at substantially lower prices than it typically sold for.Later FTC investigators determined that the caviar U.S.Caviar was selling as exotic Russian caviar was produced in the U.S.and was actually overpriced given its quality.U.S.Caviar engaged in:

A)an ethical lapse.
B)unethical advertising.
C)deceptive advertising.
D)an ethical dilemma.
E)anti-competitive advertising.

Question 73

_____ means doing what the advertiser and the advertiser's peers believe is morally right in a given situation.

A)Principled advertising
B)Situational advertising
C)Truth-in-advertising
D)Ethical advertising
E)Responsible advertising

Question 74

Ever since the Napoleonic Wars,the British have used the derogatory term 'frogs' to refer to the French.When the London-based Institute Francais advertised French language courses at all levels from beginners to advanced students,it pictured the development of a frog in stages from egg through tadpole to full maturity.This would be an example of:

A)deliberate deception.
B)advertising manipulation.
C)faux marketing.
D)stereotype perpetuation.
E)cultural malfeasance.

Question 75

In 2005,Adolph Coors Co.ran an ad which featured a purported taste test between Aspen Edge and Anheuser-Busch's Michelob Ultra.A taste-tester downed a glass of Aspen Edge and took only a sip of Michelob Ultra.A print version of the ad said,"Beer drinkers agree that Aspen Edge has more taste than Michelob Ultra".This ad is an example of _____ advertising.

A)corrective
B)professional
C)comparative
D)cease-desist
E)consent

Question 76

_____ advertising occurs when a consumer is "unjustifiably injured" or there is a "violation of public policy".

A)Deceptive
B)Corrective
C)Unfair
D)Hazardous
E)Injurious

Question 77

Which of the following statements about consumer privacy issues is true?

A)Concern about privacy is declining from a high reached during the 1990s.
B)The fact Web sites gather information about visitors without knowledge of the visitors is a privacy concern.
C)Internet companies use the information they gather about consumers to create personalized files about each individual.
D)The Federal Communications Commission regulates privacy rights.
E)Enabling cookies help the Internet users to safeguard their personal information.

Question 78

Two companies,Le Shuttle and P&O European Ferries,provide Europeans with the ability to cross the English Channel.An advertisement for Le Shuttle claimed it was more popular with travelers than P&O European Ferries.P&O European Ferries lodged an objection with a European regulatory agency and pointed out that they had carried 1.4 million cars in the previous year compared to only 1 million on the Shuttle.P&O European Ferries was hoping to get Le Shuttle to run _____ advertising.

A)corrective
B)professional
C)comparative
D)cease-desist
E)consent

Question 79

To promote responsible children's advertising and to respond to public concerns,the Council of Better Business Bureaus established the:

A)Children's Protection Agency (CPA).
B)Children's Advertising Review Unit (CARU).
C)Children's Board of Information.
D)Board of Advertising Review.
E)Code for Ethical Children's Advertising (CECA).

Question 80

With respect to offensiveness in advertising,Benetton ads frequently come under attack for its usage of nudity and sexual innuendo.Professionals indicate that the ultimate regulator of such ads is the fact that:

A)the government is currently forming policy that will completely control this form of advertising.
B)companies such as this will never be able to successfully expand worldwide where moral standards are higher than in the United States.
C)trends will eventually change and the problem will take care of itself.
D)such companies will eventually run out of money and the advertising will cease.
E)if the ads don't pull in the audience,the campaign will falter and die-the marketplace has the ultimate veto power.