11 Explain how advertising can increase the market power of a firm. (6 marks)12 Explain two possible causes of monopoly. (8 marks)

11. Advertising can increase the market power of a firm in several ways:

Step 1: Brand Recognition: Advertising helps in creating brand recognition and awareness. When consumers are aware of a product and recognize the brand, they are more likely to purchase it over less familiar products. This gives the firm a competitive edge over its rivals.

Step 2: Product Differentiation: Through advertising, a firm can differentiate its product from those of its competitors. This can be done by highlighting unique features, benefits, or superior quality. This differentiation can make the product more appealing to consumers, thereby increasing the firm's market power.

Step 3: Creating a Positive Image: Advertising can help a firm create a positive image or reputation. This can increase consumer trust and loyalty, leading to repeat purchases and a larger market share.

Step 4: Reaching a Larger Audience: Advertising allows a firm to reach a larger audience. This can increase sales and market share, thereby increasing the firm's market power.

Step 5: Influencing Consumer Behavior: Effective advertising can influence consumer behavior and preferences. This can lead to increased demand for the firm's product, thereby increasing its market power.

Step 6: Barrier to Entry: High advertising costs can act as a barrier to entry for new firms, thereby reducing competition and increasing the existing firm's market power.

12. Two possible causes of monopoly are:

Step 1: Control of a Key Resource: If a firm has exclusive control over a key resource necessary for production, it can create a monopoly. For example, if a firm owns all the diamond mines in