For each of the following pairs of firms, explain which firm would be more likely to engage in advertising.

a) A family-owned farm or a family-owned restaurant.

b) A manufacturer of forklifts or a manufacturer of cars.

c) A company that invented a very comfortable razor or a company that invented a less comfortable razor.

The answer to the given question is b) A manufacturer of forklifts or a manufacturer of cars.

• For option a) - a family-owned farm or family-owned restaurant, since the products of farm would be commodities with no differentiation, no advertising would be needed by the family-owned farm while the family-owned restaurant would require advertisement to highlight differentiation.
• For option b) - manufacturer of forklifts or a manufacturer of cars, since the cars of different manufacturers would be significantly different from one another, they would need advertising while the forklift manufacturers won't require advertising as they are hardly differentiated from one another and the premium on products is also relatively low.
• For option c) - a company that invented a very comfortable razor or a company that invented a less comfortable razor, the company that has invented a very comfortable razor will need advertising to create awareness among the prospective customers about the unique feature.