Advertising makes an immense difference in the popularity of a product. Studies have shown that consumers usually pay more for advertised products than non-advertised products. As a result, the marketing and advertising industry is a multibillion-dollar-a-year business. Local commercials can cost as little as several hundred dollars to products, while national companies have been known to spend hundreds of thousands of dollars on a single commercial. Interestingly, the source of these expensive commercials is the consumers who view the advertisements from the comfort of their living room. Companies influence the prices that consumers pay in two ways. When consumers purchase any products, they are obviously paying for the cost of manufacturing the product. However, they are also paying for the advertising campaign devised to convince consumers to buy the product. The more costly the advertising campaign, the higher the price paid by consumers. Companies are allowed to set these high prices because consumers have shown that they will continue to pay them. For instance, a multinational chain of coffee shops significantly raised its prices a few years ago, due in no small part to an expensive national advertising campaign. While regular customers noticed and were not fond of the hike, one was quoted as saying, “I doubt it will make an impact [on consumers]. It won’t change my habit.” Indeed, it did not, the company experienced record sales in spite of the fact its prices were higher than its competitors’. Another way advertising tends to affect product pricing is seen in the arena of perceived value to the consumers. The perceived value is the worth that consumers assign to a product. Studies show that often the advertising for a product determines its value more than the quality or necessity of the product itself. One way a company may take advantage of this perceived value is by running commercials during prime time. These ads are usually much more expensive than others. For example, a national commercial that ran during a popular American show cost close to $745,000 to run for thirty seconds. If people watching the show perceive that the product is more valuable simply because it was advertised during prime time, they are often willing to pay higher prices. So, whether it is seen in the cost of the commercials or the advertiser-assigned value, it is obvious that advertising drives product pricing and directly affects consumers. Question 40: How do companies determine the price they charge for a product? A. By basing their prices on advertising costs and competitor prices. B. By including the cost of advertising in the overall costs. C. By determining the overall costs of making the products. D. By choosing perceived value or manufacturing costs. Question 41: Which of the following can be inferred about pricing and advertising? A. Products that are not advertised cost more than advertised products. B. Companies selling higher-priced products usually advertised more. C. Customers will pay little for a non-advertised product. D. Local companies will not spend money on advertising. Mark the letter A, B, C, or D to indicate the sentence that is closest in meaning to each of the following questions. Question 42: Few other paintings in the world are as famous as the Mona Lisa. A. Only a small number of paintings throughout the world are equally well-known as the Mona Lisa. B. The Mona Lisa is among a group of paintings that are very famous worldwide. C. There are more famous paintings in the world than the Mona Lisa, but not many. D. A few other paintings in the world are more famous than the Mona Lisa. Question 43: Had I known how crowded it’d be, I’d never have moved to Madrid. A. Since it was so crowded in Madrid, I decided that I would never move there. B. I moved to Madrid only because I was unaware of how many people were there. C. In the end, Madrid turned out to be far more crowded than I’d thought before moving there. D. I would have had a better time living in Madrid if only there hadn’t been so many people.