Use the following to answer question:
Figure: Pricing Strategy in Cable TV Market I
-(Figure: Pricing Strategy in Cable TV Market I)Use Figure: Pricing Strategy in Cable TV Market I.If neither CableNorth nor CableSouth advertises,then without any collusion:
A)CableNorth will begin advertising to maximize profits.
B)CableSouth will begin advertising to maximize profits.
C)there will be no incentive for either CableNorth or CableSouth to begin advertising.
D)there is an incentive for both CableNorth and CableSouth to begin advertising.

Question

Use the following to answer question:
Figure: Pricing Strategy in Cable TV Market I 
-(Figure: Pricing Strategy in Cable TV Market I)Use Figure: Pricing Strategy in Cable TV Market I.If neither CableNorth nor CableSouth advertises,then without any collusion:
A)CableNorth will begin advertising to maximize profits. 
B)CableSouth will begin advertising to maximize profits. 
C)there will be no incentive for either CableNorth or CableSouth to begin advertising. 
D)there is an incentive for both CableNorth and CableSouth to begin advertising.

Quizplus · Accepted Answer

Without advertising, both CableNorth and CableSouth are pricing their service at the monopoly price, where marginal revenue equals marginal cost. There is no incentive for either company to change their pricing strategy as this would only result in a decrease in profits. Therefore, there is no reason for either company to begin advertising.

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