Explain why a perfectly competitive firm would or would not advertise.

Question

Explain why a perfectly competitive firm would or would not advertise.

Answer 1

If you get a lucky ad, you could make a lot of money.

If you don't get lucky, your money is flying out the window. Always a scary proposition. /

Answer 2

Your question is a little vague.  You don't say what kind of firm you're referring to, but that might not matter.

There is only 1 reason to advertise ..... to get more prospects and leads which can be converted into new paying clients.

If the company has a vision for significant growth then advertising may be one of the strategies they use to achieve that growth.  If they want to grow slowly then they may choose not to advertise, and use other strategies instead (like referrals and strategic partnerships).  Advertising can be very expensive.  If other strategies are working to drive in new business then you may not really need to advertise.