Which of the following is true about the effect of advertising on pricing?

The correct answer highlights the influence that advertising has on consumer perception and willingness to pay. When products are marketed with a premium image, effective advertising can shape consumers' perceptions, making them believe that these products are of higher quality and worth a higher price. This means that consumers associate the advertised image with prestige or desirability, leading them to be more willing to pay a premium price for such products.

Advertising plays a crucial role in differentiating a brand from its competitors. For instance, luxury brands often depend heavily on advertising to evoke feelings of exclusivity and high status, which in turn justifies their higher price points. As a result, consumers may not only perceive a higher value in these products but may actually decide to purchase them based on that advertised image, affirming their belief in the value communicated through advertising.

This notion contrasts with perceptions outlined in the other options. Some may argue that advertising could lower the perceived value or that it has no effect on pricing, but effective advertising often serves to elevate a product's status in the eyes of consumers, thereby fostering a willingness to pay more.