DSST Money & Banking Practice Exam 2025 - Free Money & Banking Practice Questions and Study Guide

The term that describes the intentional division of a market by competitors to minimize advertising costs is best identified as market allocation. In this scenario, competitors agree to divide their market into areas or segments, which allows each firm to target its advertising and marketing efforts in its designated area rather than competing against one another in a broader market. This strategy can lead to lower overall advertising expenditures and minimizes head-to-head competition, benefiting the companies involved.

Market allocation is often considered anti-competitive as it can limit consumer choice and keep prices high, as the lack of competition allows firms to maintain control over their respective segments without the pressure to lower prices or improve services.

In terms of the other concepts: price fixing involves collusion among competitors to set prices at a certain level, which is illegal. Market segmentation refers to the process of dividing a broad consumer or business market into sub-groups based on shared characteristics, which does not necessarily involve minimizing advertising costs through division. Market penetration strategies focus on increasing market share within existing markets and do not relate to the division of markets by competitors. Thus, market allocation is the most appropriate term for this scenario.