The Biggest Star of Super Bowl LVII Commercials? Nostalgia

EconEye Admin

3 years ago

Although a range of companies are advertising during Super Bowl LVII, a common theme runs through many of the spots: nostalgia. The Super Bowl is advertising’s biggest stage. Last year, more than 208 million people watched the big game. This year, a 30-second ad costs about $7 million.—cbsnews.com

Answer the following questions to check your understanding of the story.

1) Why would a firm spend $7 million on a 30-second Super Bowl ad emphasizing nostalgia and giving no specific product information?

A $7-million Super Bowl ad that emphasizes nostalgia and gives no specific product information is a signal to the ____________ of a high-quality product, and the advertiser expects it will ____________.

a) consumer; increase total revenue by more than $7 million

b) advertiser’s competitors; increase its share of the market

c) advertiser’s competitors; increase total revenue by more than $7 million

d) consumer; increase its share of the market

Wrong! - Does advertising send a signal to the consumer or to the advertiser’s competitors? How does that signal work when an ad gives no specific production information?

Good Job! - A $7-million Super Bowl ad is a signal to the consumer of a high-quality product, and the advertiser expects it will increase its profit.

2) How does the purchase of a $7-million Super Bowl ad influence a firm’s costs?

The firm’s ________________.

a) total fixed cost increases by $7 million

b) average total cost decreases

c) total variable cost increases by $7 million

d) marginal cost increases by $7 million

Wrong! - What is fixed cost? What is variable cost? What is marginal cost? Is advertising a fixed cost, a variable cost, or a marginal cost? How does advertising change average total cost?

Correct! - Advertising is a fixed cost—regardless of a firm’s output, the Super Bowl ad expenditure doesn’t change. So, when a firm purchases a Super Bowl ad, its total fixed cost increases by $7 million.

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