Under oligopoly,if one firm in an industry significantly increases advertising expenditures in order to capture a greater market share,it is most likely that other firms in that industry will
A) pursue a strategy to reduce advertising expenditures to maintain profit.
B) decide to increase advertising expenditures even if it means a reduction in profit.
C) make no changes in advertising expenditures,because advertising is effective in the short run,but not the long run.
D) increase the price of the product to improve profit and then increase advertising expenditures.
E) try to buy out the firm that significantly increases advertising expenditures in order to capture a greater market share.

Question

Quizplus · Accepted Answer

In an oligopoly, firms are interdependent, and if one firm increases advertising to capture market share, others are likely to follow suit to maintain their competitive position, even if it reduces short-term profits.

Under Oligopoly,if One Firm in an Industry Significantly Increases Advertising